Correlation Between Mayora Indah and Buyung Poetra

Can any of the company-specific risk be diversified away by investing in both Mayora Indah and Buyung Poetra 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 Mayora Indah and Buyung Poetra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mayora Indah Tbk and Buyung Poetra Sembada, you can compare the effects of market volatilities on Mayora Indah and Buyung Poetra 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 Mayora Indah with a short position of Buyung Poetra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mayora Indah and Buyung Poetra.

Diversification Opportunities for Mayora Indah and Buyung Poetra

0.46

Correlation Coefficient

Mayora Indah  Buyung Poetra

Very weak diversification

The 3 months correlation between Mayora and Buyung is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mayora Indah Tbk and Buyung Poetra Sembada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buyung Poetra Sembada and Mayora Indah 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 Mayora Indah Tbk are associated (or correlated) with Buyung Poetra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buyung Poetra Sembada has no effect on the direction of Mayora Indah i.e., Mayora Indah and Buyung Poetra go up and down completely randomly.

Pair Corralation between Mayora Indah and Buyung Poetra

Assuming the 90 days trading horizon Mayora Indah is expected to generate 1.02 times less return on investment than Buyung Poetra. But when comparing it to its historical volatility, Mayora Indah Tbk is 1.67 times less risky than Buyung Poetra. It trades about 0.04 of its potential returns per unit of risk. Buyung Poetra Sembada is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  12,200  in Buyung Poetra Sembada on September 3, 2024 and sell it today you would earn a total of  200.00  from holding Buyung Poetra Sembada or generate 1.64% return on investment over 90 days.

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

Mayora Indah Tbk  vs.  Buyung Poetra Sembada

Mayora Indah Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mayora Indah Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Mayora Indah is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Buyung Poetra Sembada

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Buyung Poetra Sembada are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Buyung Poetra 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 Mayora Indah and Buyung Poetra

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

The idea behind Mayora Indah Tbk and Buyung Poetra Sembada 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..