Correlation Between Multi Makmur and Multi Indocitra

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

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

Diversification Opportunities for Multi Makmur and Multi Indocitra

-0.72

Correlation Coefficient

Multi Makmur  Multi Indocitra

Pay attention - limited upside

The 3 months correlation between Multi and Multi is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Multi Makmur Lemindo 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 Multi Makmur 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 Multi Makmur Lemindo 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 Multi Makmur i.e., Multi Makmur and Multi Indocitra go up and down completely randomly.

Pair Corralation between Multi Makmur and Multi Indocitra

Assuming the 90 days trading horizon Multi Makmur Lemindo is expected to generate 5.46 times more return on investment than Multi Indocitra. However, Multi Makmur is 5.46 times more volatile than Multi Indocitra Tbk. It trades about 0.19 of its potential returns per unit of risk. Multi Indocitra Tbk is currently generating about -0.08 per unit of risk. If you would invest  900.00  in Multi Makmur Lemindo on November 29, 2024 and sell it today you would earn a total of  800.00  from holding Multi Makmur Lemindo or generate 88.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Multi Makmur Lemindo  vs.  Multi Indocitra Tbk

Multi Makmur Lemindo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Makmur Lemindo are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multi Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Multi Indocitra Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Multi Indocitra Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Multi Makmur and Multi Indocitra

The main advantage of trading using opposite Multi Makmur and Multi Indocitra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Makmur 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 Multi Makmur Lemindo 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.