Correlation Between Mustika Ratu and Kapuas Prima

Can any of the company-specific risk be diversified away by investing in both Mustika Ratu and Kapuas Prima 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 Mustika Ratu and Kapuas Prima into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mustika Ratu Tbk and Kapuas Prima Coal, you can compare the effects of market volatilities on Mustika Ratu and Kapuas Prima 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 Mustika Ratu with a short position of Kapuas Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mustika Ratu and Kapuas Prima.

Diversification Opportunities for Mustika Ratu and Kapuas Prima

-0.42

Correlation Coefficient

Mustika Ratu  Kapuas Prima

Very good diversification

The 3 months correlation between Mustika and Kapuas is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mustika Ratu Tbk and Kapuas Prima Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kapuas Prima Coal and Mustika Ratu 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 Mustika Ratu Tbk are associated (or correlated) with Kapuas Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kapuas Prima Coal has no effect on the direction of Mustika Ratu i.e., Mustika Ratu and Kapuas Prima go up and down completely randomly.

Pair Corralation between Mustika Ratu and Kapuas Prima

Assuming the 90 days trading horizon Mustika Ratu Tbk is expected to under-perform the Kapuas Prima. But the stock apears to be less risky and, when comparing its historical volatility, Mustika Ratu Tbk is 2.18 times less risky than Kapuas Prima. The stock trades about -0.12 of its potential returns per unit of risk. The Kapuas Prima Coal is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,600  in Kapuas Prima Coal on October 25, 2024 and sell it today you would earn a total of  300.00  from holding Kapuas Prima Coal or generate 18.75% return on investment over 90 days.

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

Mustika Ratu Tbk  vs.  Kapuas Prima Coal

Mustika Ratu Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mustika Ratu Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kapuas Prima Coal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kapuas Prima Coal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kapuas Prima disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mustika Ratu and Kapuas Prima

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

The idea behind Mustika Ratu Tbk and Kapuas Prima Coal 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.