Correlation Between Weha Transportasi and Mitra Energi

Can any of the company-specific risk be diversified away by investing in both Weha Transportasi and Mitra Energi 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 Mitra Energi 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 Mitra Energi Persada, you can compare the effects of market volatilities on Weha Transportasi and Mitra Energi 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 Mitra Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weha Transportasi and Mitra Energi.

Diversification Opportunities for Weha Transportasi and Mitra Energi

-0.22

Correlation Coefficient

Weha Transportasi  Mitra Energi

Very good diversification

The 3 months correlation between Weha and Mitra is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Weha Transportasi Indonesia and Mitra Energi Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitra Energi Persada 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 Mitra Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitra Energi Persada has no effect on the direction of Weha Transportasi i.e., Weha Transportasi and Mitra Energi go up and down completely randomly.

Pair Corralation between Weha Transportasi and Mitra Energi

Assuming the 90 days trading horizon Weha Transportasi Indonesia is expected to under-perform the Mitra Energi. But the stock apears to be less risky and, when comparing its historical volatility, Weha Transportasi Indonesia is 2.42 times less risky than Mitra Energi. The stock trades about -0.35 of its potential returns per unit of risk. The Mitra Energi Persada is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  63,000  in Mitra Energi Persada on October 25, 2024 and sell it today you would earn a total of  10,000  from holding Mitra Energi Persada or generate 15.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Weha Transportasi Indonesia  vs.  Mitra Energi Persada

Weha Transportasi

Risk-Adjusted Performance

0 of 100

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 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.

Mitra Energi Persada

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitra Energi Persada are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mitra Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weha Transportasi and Mitra Energi

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

The idea behind Weha Transportasi Indonesia and Mitra Energi Persada 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.