Correlation Between Mandom Indonesia and Mustika Ratu

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

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

Diversification Opportunities for Mandom Indonesia and Mustika Ratu

0.78

Correlation Coefficient

Mandom Indonesia  Mustika Ratu

Poor diversification

The 3 months correlation between Mandom and Mustika is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mandom Indonesia Tbk and Mustika Ratu Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustika Ratu Tbk and Mandom Indonesia 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 Mandom Indonesia Tbk are associated (or correlated) with Mustika Ratu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustika Ratu Tbk has no effect on the direction of Mandom Indonesia i.e., Mandom Indonesia and Mustika Ratu go up and down completely randomly.

Pair Corralation between Mandom Indonesia and Mustika Ratu

Assuming the 90 days trading horizon Mandom Indonesia Tbk is expected to generate 1.03 times more return on investment than Mustika Ratu. However, Mandom Indonesia is 1.03 times more volatile than Mustika Ratu Tbk. It trades about -0.07 of its potential returns per unit of risk. Mustika Ratu Tbk is currently generating about -0.28 per unit of risk. If you would invest  251,000  in Mandom Indonesia Tbk on August 31, 2024 and sell it today you would lose (22,000) from holding Mandom Indonesia Tbk or give up 8.76% of portfolio value over 90 days.

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

Mandom Indonesia Tbk  vs.  Mustika Ratu Tbk

Mandom Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mandom Indonesia 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.

Mustika Ratu Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mustika Ratu 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.

Pair Trading with Mandom Indonesia and Mustika Ratu

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

The idea behind Mandom Indonesia Tbk and Mustika Ratu 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.