Correlation Between Mitra Pinasthika and Sumber Energi

Can any of the company-specific risk be diversified away by investing in both Mitra Pinasthika and Sumber Energi at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mitra Pinasthika and Sumber Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mitra Pinasthika Mustika and Sumber Energi Andalan, you can compare the effects of market volatilities on Mitra Pinasthika and Sumber Energi and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mitra Pinasthika with a short position of Sumber Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitra Pinasthika and Sumber Energi.

Diversification Opportunities for Mitra Pinasthika and Sumber Energi

0.75

Correlation Coefficient

Mitra Pinasthika  Sumber Energi

Poor diversification

The 3 months correlation between Mitra and Sumber is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mitra Pinasthika Mustika and Sumber Energi Andalan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Energi Andalan and Mitra Pinasthika is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mitra Pinasthika Mustika are associated (or correlated) with Sumber Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Energi Andalan has no effect on the direction of Mitra Pinasthika i.e., Mitra Pinasthika and Sumber Energi go up and down completely randomly.

Pair Corralation between Mitra Pinasthika and Sumber Energi

Assuming the 90 days trading horizon Mitra Pinasthika is expected to generate 3.98 times less return on investment than Sumber Energi. But when comparing it to its historical volatility, Mitra Pinasthika Mustika is 3.46 times less risky than Sumber Energi. It trades about 0.02 of its potential returns per unit of risk. Sumber Energi Andalan is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  71,000  in Sumber Energi Andalan on October 7, 2024 and sell it today you would earn a total of  8,000  from holding Sumber Energi Andalan or generate 11.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Mitra Pinasthika Mustika  vs.  Sumber Energi Andalan

Mitra Pinasthika Mustika

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitra Pinasthika Mustika has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mitra Pinasthika is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sumber Energi Andalan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Energi Andalan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sumber Energi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mitra Pinasthika and Sumber Energi

The main advantage of trading using opposite Mitra Pinasthika and Sumber Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitra Pinasthika position performs unexpectedly, Sumber Energi can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sumber Energi will offset losses from the drop in Sumber Energi's long position.

The idea behind Mitra Pinasthika Mustika and Sumber Energi Andalan pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.