Correlation Between Megapower Makmur and Victoria Insurance

Can any of the company-specific risk be diversified away by investing in both Megapower Makmur and Victoria Insurance 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 Victoria Insurance 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 Victoria Insurance Tbk, you can compare the effects of market volatilities on Megapower Makmur and Victoria Insurance 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 Victoria Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megapower Makmur and Victoria Insurance.

Diversification Opportunities for Megapower Makmur and Victoria Insurance

-0.4

Correlation Coefficient

Megapower Makmur  Victoria Insurance

Very good diversification

The 3 months correlation between Megapower and Victoria is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Megapower Makmur TBK and Victoria Insurance Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victoria Insurance Tbk 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 Victoria Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victoria Insurance Tbk has no effect on the direction of Megapower Makmur i.e., Megapower Makmur and Victoria Insurance go up and down completely randomly.

Pair Corralation between Megapower Makmur and Victoria Insurance

Assuming the 90 days trading horizon Megapower Makmur TBK is expected to under-perform the Victoria Insurance. In addition to that, Megapower Makmur is 1.94 times more volatile than Victoria Insurance Tbk. It trades about -0.1 of its total potential returns per unit of risk. Victoria Insurance Tbk is currently generating about -0.1 per unit of volatility. If you would invest  11,200  in Victoria Insurance Tbk on October 10, 2024 and sell it today you would lose (400.00) from holding Victoria Insurance Tbk or give up 3.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Megapower Makmur TBK  vs.  Victoria Insurance Tbk

Megapower Makmur TBK

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Megapower Makmur TBK are ranked lower than 3 (%) 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.

Victoria Insurance Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victoria Insurance Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Victoria Insurance 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 Victoria Insurance

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

The idea behind Megapower Makmur TBK and Victoria Insurance Tbk 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.