Correlation Between Optima Prima and Modern Internasional

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

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

Diversification Opportunities for Optima Prima and Modern Internasional

0.05

Correlation Coefficient

Optima Prima  Modern Internasional

Significant diversification

The 3 months correlation between Optima and Modern is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Optima Prima Metal 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 Optima Prima 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 Optima Prima Metal 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 Optima Prima i.e., Optima Prima and Modern Internasional go up and down completely randomly.

Pair Corralation between Optima Prima and Modern Internasional

Assuming the 90 days trading horizon Optima Prima Metal is expected to under-perform the Modern Internasional. But the stock apears to be less risky and, when comparing its historical volatility, Optima Prima Metal is 14.01 times less risky than Modern Internasional. The stock trades about -0.09 of its potential returns per unit of risk. The Modern Internasional Tbk is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  600.00  in Modern Internasional Tbk on December 31, 2024 and sell it today you would earn a total of  200.00  from holding Modern Internasional Tbk or generate 33.33% return on investment over 90 days.

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

Optima Prima Metal  vs.  Modern Internasional Tbk

Optima Prima Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optima Prima Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Optima Prima 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Internasional Tbk are ranked lower than 7 (%) 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 Optima Prima and Modern Internasional

The main advantage of trading using opposite Optima Prima and Modern Internasional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Prima 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 Optima Prima Metal 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.