Correlation Between Prodia Widyahusada and Metro Healthcare

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

By analyzing existing cross correlation between Prodia Widyahusada Tbk and Metro Healthcare Indonesia, you can compare the effects of market volatilities on Prodia Widyahusada and Metro Healthcare 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 Prodia Widyahusada with a short position of Metro Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prodia Widyahusada and Metro Healthcare.

Diversification Opportunities for Prodia Widyahusada and Metro Healthcare

-0.9

Correlation Coefficient

Prodia Widyahusada  Metro Healthcare

Pay attention - limited upside

The 3 months correlation between Prodia and Metro is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Prodia Widyahusada Tbk and Metro Healthcare Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Healthcare Ind and Prodia Widyahusada 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 Prodia Widyahusada Tbk are associated (or correlated) with Metro Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Healthcare Ind has no effect on the direction of Prodia Widyahusada i.e., Prodia Widyahusada and Metro Healthcare go up and down completely randomly.

Pair Corralation between Prodia Widyahusada and Metro Healthcare

Assuming the 90 days trading horizon Prodia Widyahusada Tbk is expected to under-perform the Metro Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Prodia Widyahusada Tbk is 2.42 times less risky than Metro Healthcare. The stock trades about -0.27 of its potential returns per unit of risk. The Metro Healthcare Indonesia is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  13,100  in Metro Healthcare Indonesia on September 1, 2024 and sell it today you would earn a total of  4,000  from holding Metro Healthcare Indonesia or generate 30.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Prodia Widyahusada Tbk  vs.  Metro Healthcare Indonesia

Prodia Widyahusada Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prodia Widyahusada Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Metro Healthcare Ind

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Metro Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prodia Widyahusada and Metro Healthcare

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

The idea behind Prodia Widyahusada Tbk and Metro Healthcare Indonesia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.