Correlation Between Megapower Makmur and Malacca Trust

Can any of the company-specific risk be diversified away by investing in both Megapower Makmur and Malacca Trust 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 Megapower Makmur and Malacca Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Megapower Makmur TBK and Malacca Trust Wuwungan, you can compare the effects of market volatilities on Megapower Makmur and Malacca Trust 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 Megapower Makmur with a short position of Malacca Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megapower Makmur and Malacca Trust.

Diversification Opportunities for Megapower Makmur and Malacca Trust

-0.34

Correlation Coefficient

Megapower Makmur  Malacca Trust

Very good diversification

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

Pair Corralation between Megapower Makmur and Malacca Trust

Assuming the 90 days trading horizon Megapower Makmur TBK is expected to under-perform the Malacca Trust. In addition to that, Megapower Makmur is 3.12 times more volatile than Malacca Trust Wuwungan. It trades about -0.04 of its total potential returns per unit of risk. Malacca Trust Wuwungan is currently generating about -0.08 per unit of volatility. If you would invest  16,100  in Malacca Trust Wuwungan on October 9, 2024 and sell it today you would lose (300.00) from holding Malacca Trust Wuwungan or give up 1.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Megapower Makmur TBK  vs.  Malacca Trust Wuwungan

Megapower Makmur TBK

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Megapower Makmur TBK are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Megapower Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Malacca Trust Wuwungan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malacca Trust Wuwungan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Malacca Trust 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 Megapower Makmur and Malacca Trust

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

The idea behind Megapower Makmur TBK and Malacca Trust Wuwungan 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.