Correlation Between Ultra Jaya and Medikaloka Hermina

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

By analyzing existing cross correlation between Ultra Jaya Milk and Medikaloka Hermina PT, you can compare the effects of market volatilities on Ultra Jaya and Medikaloka Hermina 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 Ultra Jaya with a short position of Medikaloka Hermina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Jaya and Medikaloka Hermina.

Diversification Opportunities for Ultra Jaya and Medikaloka Hermina

0.62

Correlation Coefficient

Ultra Jaya  Medikaloka Hermina

Poor diversification

The 3 months correlation between Ultra and Medikaloka is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Jaya Milk and Medikaloka Hermina PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medikaloka Hermina and Ultra Jaya 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 Ultra Jaya Milk are associated (or correlated) with Medikaloka Hermina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medikaloka Hermina has no effect on the direction of Ultra Jaya i.e., Ultra Jaya and Medikaloka Hermina go up and down completely randomly.

Pair Corralation between Ultra Jaya and Medikaloka Hermina

Assuming the 90 days trading horizon Ultra Jaya is expected to generate 1.02 times less return on investment than Medikaloka Hermina. But when comparing it to its historical volatility, Ultra Jaya Milk is 1.15 times less risky than Medikaloka Hermina. It trades about 0.03 of its potential returns per unit of risk. Medikaloka Hermina PT is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  146,057  in Medikaloka Hermina PT on October 3, 2024 and sell it today you would earn a total of  16,943  from holding Medikaloka Hermina PT or generate 11.6% return on investment over 90 days.

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

Ultra Jaya Milk  vs.  Medikaloka Hermina PT

Ultra Jaya Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Jaya Milk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Ultra Jaya is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Medikaloka Hermina

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medikaloka Hermina PT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Medikaloka Hermina may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ultra Jaya and Medikaloka Hermina

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

The idea behind Ultra Jaya Milk and Medikaloka Hermina PT 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.