Correlation Between Weha Transportasi and First Media

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

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

Diversification Opportunities for Weha Transportasi and First Media

0.19

Correlation Coefficient

Weha Transportasi  First Media

Average diversification

The 3 months correlation between Weha and First is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Weha Transportasi Indonesia and First Media Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Media Tbk and Weha Transportasi 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 Weha Transportasi Indonesia are associated (or correlated) with First Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Media Tbk has no effect on the direction of Weha Transportasi i.e., Weha Transportasi and First Media go up and down completely randomly.

Pair Corralation between Weha Transportasi and First Media

Assuming the 90 days trading horizon Weha Transportasi Indonesia is expected to under-perform the First Media. In addition to that, Weha Transportasi is 1.15 times more volatile than First Media Tbk. It trades about -0.06 of its total potential returns per unit of risk. First Media Tbk is currently generating about 0.0 per unit of volatility. If you would invest  9,000  in First Media Tbk on December 28, 2024 and sell it today you would lose (100.00) from holding First Media Tbk or give up 1.11% of portfolio value over 90 days.

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

Weha Transportasi Indonesia  vs.  First Media Tbk

Weha Transportasi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Weha Transportasi Indonesia 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.

First Media Tbk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Weha Transportasi and First Media

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

The idea behind Weha Transportasi Indonesia and First Media 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.