Correlation Between Protech Mitra and Modern Internasional

Can any of the company-specific risk be diversified away by investing in both Protech Mitra and Modern Internasional 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 Protech Mitra and Modern Internasional into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Protech Mitra Perkasa and Modern Internasional Tbk, you can compare the effects of market volatilities on Protech Mitra and Modern Internasional 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 Protech Mitra with a short position of Modern Internasional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Protech Mitra and Modern Internasional.

Diversification Opportunities for Protech Mitra and Modern Internasional

0.42

Correlation Coefficient

Protech Mitra  Modern Internasional

Very weak diversification

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

Pair Corralation between Protech Mitra and Modern Internasional

Assuming the 90 days trading horizon Protech Mitra is expected to generate 13.12 times less return on investment than Modern Internasional. But when comparing it to its historical volatility, Protech Mitra Perkasa is 2.37 times less risky than Modern Internasional. It trades about 0.01 of its potential returns per unit of risk. Modern Internasional Tbk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  600.00  in Modern Internasional Tbk on September 16, 2024 and sell it today you would earn a total of  100.00  from holding Modern Internasional Tbk or generate 16.67% return on investment over 90 days.

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

Protech Mitra Perkasa  vs.  Modern Internasional Tbk

Protech Mitra Perkasa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Modern Internasional Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Internasional Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Modern Internasional disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Protech Mitra and Modern Internasional

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

The idea behind Protech Mitra Perkasa and Modern Internasional 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.