Correlation Between Soechi Lines and Matahari Department

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

By analyzing existing cross correlation between Soechi Lines Tbk and Matahari Department Store, you can compare the effects of market volatilities on Soechi Lines and Matahari Department 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 Soechi Lines with a short position of Matahari Department. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soechi Lines and Matahari Department.

Diversification Opportunities for Soechi Lines and Matahari Department

0.66

Correlation Coefficient

Soechi Lines  Matahari Department

Poor diversification

The 3 months correlation between Soechi and Matahari is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Soechi Lines Tbk and Matahari Department Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matahari Department Store and Soechi Lines 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 Soechi Lines Tbk are associated (or correlated) with Matahari Department. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matahari Department Store has no effect on the direction of Soechi Lines i.e., Soechi Lines and Matahari Department go up and down completely randomly.

Pair Corralation between Soechi Lines and Matahari Department

Assuming the 90 days trading horizon Soechi Lines Tbk is expected to under-perform the Matahari Department. But the stock apears to be less risky and, when comparing its historical volatility, Soechi Lines Tbk is 1.49 times less risky than Matahari Department. The stock trades about -0.04 of its potential returns per unit of risk. The Matahari Department Store is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  169,155  in Matahari Department Store on October 27, 2024 and sell it today you would lose (18,155) from holding Matahari Department Store or give up 10.73% of portfolio value over 90 days.

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

Soechi Lines Tbk  vs.  Matahari Department Store

Soechi Lines Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soechi Lines 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Matahari Department Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matahari Department Store has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Matahari Department 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 Soechi Lines and Matahari Department

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

The idea behind Soechi Lines Tbk and Matahari Department Store 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.