Correlation Between Metrodata Electronics and Kedawung Setia

Can any of the company-specific risk be diversified away by investing in both Metrodata Electronics and Kedawung Setia 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 Metrodata Electronics and Kedawung Setia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metrodata Electronics Tbk and Kedawung Setia Industrial, you can compare the effects of market volatilities on Metrodata Electronics and Kedawung Setia 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 Metrodata Electronics with a short position of Kedawung Setia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metrodata Electronics and Kedawung Setia.

Diversification Opportunities for Metrodata Electronics and Kedawung Setia

0.3

Correlation Coefficient

Metrodata Electronics  Kedawung Setia

Weak diversification

The 3 months correlation between Metrodata and Kedawung is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Metrodata Electronics Tbk and Kedawung Setia Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedawung Setia Industrial and Metrodata Electronics 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 Metrodata Electronics Tbk are associated (or correlated) with Kedawung Setia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedawung Setia Industrial has no effect on the direction of Metrodata Electronics i.e., Metrodata Electronics and Kedawung Setia go up and down completely randomly.

Pair Corralation between Metrodata Electronics and Kedawung Setia

Assuming the 90 days trading horizon Metrodata Electronics Tbk is expected to under-perform the Kedawung Setia. But the stock apears to be less risky and, when comparing its historical volatility, Metrodata Electronics Tbk is 1.27 times less risky than Kedawung Setia. The stock trades about -0.08 of its potential returns per unit of risk. The Kedawung Setia Industrial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  44,200  in Kedawung Setia Industrial on October 12, 2024 and sell it today you would earn a total of  1,400  from holding Kedawung Setia Industrial or generate 3.17% return on investment over 90 days.

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

Metrodata Electronics Tbk  vs.  Kedawung Setia Industrial

Metrodata Electronics Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kedawung Setia Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kedawung Setia Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kedawung Setia 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 Metrodata Electronics and Kedawung Setia

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

The idea behind Metrodata Electronics Tbk and Kedawung Setia Industrial 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.