Correlation Between Victoria Insurance and Megapower Makmur

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

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

Diversification Opportunities for Victoria Insurance and Megapower Makmur

-0.4

Correlation Coefficient

Victoria Insurance  Megapower Makmur

Very good diversification

The 3 months correlation between Victoria and Megapower is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Victoria Insurance Tbk and Megapower Makmur TBK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megapower Makmur TBK and Victoria Insurance 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 Victoria Insurance Tbk are associated (or correlated) with Megapower Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megapower Makmur TBK has no effect on the direction of Victoria Insurance i.e., Victoria Insurance and Megapower Makmur go up and down completely randomly.

Pair Corralation between Victoria Insurance and Megapower Makmur

Assuming the 90 days trading horizon Victoria Insurance Tbk is expected to generate 0.51 times more return on investment than Megapower Makmur. However, Victoria Insurance Tbk is 1.94 times less risky than Megapower Makmur. It trades about -0.1 of its potential returns per unit of risk. Megapower Makmur TBK is currently generating about -0.1 per unit of risk. If you would invest  11,200  in Victoria Insurance Tbk on October 10, 2024 and sell it today you would lose (400.00) from holding Victoria Insurance Tbk or give up 3.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Victoria Insurance Tbk  vs.  Megapower Makmur TBK

Victoria Insurance Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Megapower Makmur TBK

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Megapower Makmur TBK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Megapower Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Victoria Insurance and Megapower Makmur

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

The idea behind Victoria Insurance Tbk and Megapower Makmur 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.