Correlation Between Visi Media and Repower Asia

Can any of the company-specific risk be diversified away by investing in both Visi Media and Repower Asia 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 Visi Media and Repower Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Visi Media and Repower Asia

0.1

Correlation Coefficient

Visi Media  Repower Asia

Average diversification

The 3 months correlation between Visi and Repower is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Visi Media Asia and Repower Asia Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repower Asia Indonesia and Visi Media 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 Visi Media Asia are associated (or correlated) with Repower Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repower Asia Indonesia has no effect on the direction of Visi Media i.e., Visi Media and Repower Asia go up and down completely randomly.

Pair Corralation between Visi Media and Repower Asia

Assuming the 90 days trading horizon Visi Media Asia is expected to under-perform the Repower Asia. But the stock apears to be less risky and, when comparing its historical volatility, Visi Media Asia is 2.29 times less risky than Repower Asia. The stock trades about -0.08 of its potential returns per unit of risk. The Repower Asia Indonesia is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,000  in Repower Asia Indonesia on October 26, 2024 and sell it today you would lose (4,100) from holding Repower Asia Indonesia or give up 82.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Visi Media Asia  vs.  Repower Asia Indonesia

Visi Media Asia

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visi Media Asia are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Visi Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Repower Asia Indonesia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Repower Asia Indonesia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Repower Asia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visi Media and Repower Asia

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

The idea behind Visi Media Asia and Repower Asia 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.