Correlation Between Surya Permata and Medikaloka Hermina

Can any of the company-specific risk be diversified away by investing in both Surya Permata and Medikaloka Hermina 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 Surya Permata and Medikaloka Hermina into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Surya Permata Andalan and Medikaloka Hermina PT, you can compare the effects of market volatilities on Surya Permata and Medikaloka Hermina 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 Surya Permata with a short position of Medikaloka Hermina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Surya Permata and Medikaloka Hermina.

Diversification Opportunities for Surya Permata and Medikaloka Hermina

0.22

Correlation Coefficient

Surya Permata  Medikaloka Hermina

Modest diversification

The 3 months correlation between Surya and Medikaloka is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Surya Permata Andalan and Medikaloka Hermina PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medikaloka Hermina and Surya Permata 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 Surya Permata Andalan are associated (or correlated) with Medikaloka Hermina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medikaloka Hermina has no effect on the direction of Surya Permata i.e., Surya Permata and Medikaloka Hermina go up and down completely randomly.

Pair Corralation between Surya Permata and Medikaloka Hermina

Assuming the 90 days trading horizon Surya Permata Andalan is expected to under-perform the Medikaloka Hermina. But the stock apears to be less risky and, when comparing its historical volatility, Surya Permata Andalan is 1.55 times less risky than Medikaloka Hermina. The stock trades about -0.05 of its potential returns per unit of risk. The Medikaloka Hermina PT is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  129,500  in Medikaloka Hermina PT on September 2, 2024 and sell it today you would earn a total of  22,000  from holding Medikaloka Hermina PT or generate 16.99% return on investment over 90 days.

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

Surya Permata Andalan  vs.  Medikaloka Hermina PT

Surya Permata Andalan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Medikaloka Hermina

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medikaloka Hermina PT are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Medikaloka Hermina disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Surya Permata and Medikaloka Hermina

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

The idea behind Surya Permata Andalan and Medikaloka Hermina PT 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.