Correlation Between Pan Brothers and Multi Indocitra

Can any of the company-specific risk be diversified away by investing in both Pan Brothers and Multi Indocitra 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 Pan Brothers and Multi Indocitra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pan Brothers Tbk and Multi Indocitra Tbk, you can compare the effects of market volatilities on Pan Brothers and Multi Indocitra 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 Pan Brothers with a short position of Multi Indocitra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Brothers and Multi Indocitra.

Diversification Opportunities for Pan Brothers and Multi Indocitra

0.4

Correlation Coefficient

Pan Brothers  Multi Indocitra

Very weak diversification

The 3 months correlation between Pan and Multi is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pan Brothers Tbk and Multi Indocitra Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Indocitra Tbk and Pan Brothers 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 Pan Brothers Tbk are associated (or correlated) with Multi Indocitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Indocitra Tbk has no effect on the direction of Pan Brothers i.e., Pan Brothers and Multi Indocitra go up and down completely randomly.

Pair Corralation between Pan Brothers and Multi Indocitra

Assuming the 90 days trading horizon Pan Brothers Tbk is expected to under-perform the Multi Indocitra. In addition to that, Pan Brothers is 1.21 times more volatile than Multi Indocitra Tbk. It trades about -0.06 of its total potential returns per unit of risk. Multi Indocitra Tbk is currently generating about 0.01 per unit of volatility. If you would invest  51,446  in Multi Indocitra Tbk on October 10, 2024 and sell it today you would lose (2,046) from holding Multi Indocitra Tbk or give up 3.98% of portfolio value over 90 days.

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

Pan Brothers Tbk  vs.  Multi Indocitra Tbk

Pan Brothers Tbk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Brothers Tbk are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pan Brothers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Multi Indocitra Tbk

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Multi Indocitra Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Multi Indocitra 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 Pan Brothers and Multi Indocitra

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

The idea behind Pan Brothers Tbk and Multi Indocitra 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.