Correlation Between Mitra Pinasthika and Red Planet

Can any of the company-specific risk be diversified away by investing in both Mitra Pinasthika and Red Planet 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 Red Planet 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 Red Planet Indonesia, you can compare the effects of market volatilities on Mitra Pinasthika and Red Planet 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 Red Planet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitra Pinasthika and Red Planet.

Diversification Opportunities for Mitra Pinasthika and Red Planet

-0.34

Correlation Coefficient

Mitra Pinasthika  Red Planet

Very good diversification

The 3 months correlation between Mitra and Red is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Mitra Pinasthika Mustika and Red Planet Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Planet Indonesia 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 Red Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Planet Indonesia has no effect on the direction of Mitra Pinasthika i.e., Mitra Pinasthika and Red Planet go up and down completely randomly.

Pair Corralation between Mitra Pinasthika and Red Planet

Assuming the 90 days trading horizon Mitra Pinasthika Mustika is expected to generate 0.42 times more return on investment than Red Planet. However, Mitra Pinasthika Mustika is 2.4 times less risky than Red Planet. It trades about 0.02 of its potential returns per unit of risk. Red Planet Indonesia is currently generating about -0.04 per unit of risk. If you would invest  90,781  in Mitra Pinasthika Mustika on September 4, 2024 and sell it today you would earn a total of  7,719  from holding Mitra Pinasthika Mustika or generate 8.5% return on investment over 90 days.

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

Mitra Pinasthika Mustika  vs.  Red Planet Indonesia

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.

Red Planet Indonesia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Planet Indonesia are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Red Planet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitra Pinasthika and Red Planet

The main advantage of trading using opposite Mitra Pinasthika and Red Planet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitra Pinasthika position performs unexpectedly, Red Planet 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 Red Planet will offset losses from the drop in Red Planet's long position.

The idea behind Mitra Pinasthika Mustika and Red Planet Indonesia 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.