Correlation Between Wijaya Karya and Megapower Makmur

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

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

Diversification Opportunities for Wijaya Karya and Megapower Makmur

-0.51

Correlation Coefficient

Wijaya Karya  Megapower Makmur

Excellent diversification

The 3 months correlation between Wijaya and Megapower is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Wijaya Karya Bangunan 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 Wijaya Karya 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 Wijaya Karya Bangunan 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 Wijaya Karya i.e., Wijaya Karya and Megapower Makmur go up and down completely randomly.

Pair Corralation between Wijaya Karya and Megapower Makmur

Assuming the 90 days trading horizon Wijaya Karya Bangunan is expected to under-perform the Megapower Makmur. But the stock apears to be less risky and, when comparing its historical volatility, Wijaya Karya Bangunan is 1.73 times less risky than Megapower Makmur. The stock trades about -0.34 of its potential returns per unit of risk. The Megapower Makmur TBK is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  8,800  in Megapower Makmur TBK on October 10, 2024 and sell it today you would lose (700.00) from holding Megapower Makmur TBK or give up 7.95% of portfolio value over 90 days.

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

Wijaya Karya Bangunan  vs.  Megapower Makmur TBK

Wijaya Karya Bangunan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wijaya Karya Bangunan 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.

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 Wijaya Karya and Megapower Makmur

The main advantage of trading using opposite Wijaya Karya and Megapower Makmur positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wijaya Karya 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 Wijaya Karya Bangunan 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.