Correlation Between PT Ace and MBANK

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

By analyzing existing cross correlation between PT Ace Hardware and MBANK, you can compare the effects of market volatilities on PT Ace and MBANK 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 PT Ace with a short position of MBANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Ace and MBANK.

Diversification Opportunities for PT Ace and MBANK

0.62

Correlation Coefficient

PT Ace  MBANK

Poor diversification

The 3 months correlation between 4AH1 and MBANK is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PT Ace Hardware and MBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBANK and PT Ace 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 PT Ace Hardware are associated (or correlated) with MBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBANK has no effect on the direction of PT Ace i.e., PT Ace and MBANK go up and down completely randomly.

Pair Corralation between PT Ace and MBANK

Assuming the 90 days trading horizon PT Ace Hardware is expected to generate 2.17 times more return on investment than MBANK. However, PT Ace is 2.17 times more volatile than MBANK. It trades about -0.02 of its potential returns per unit of risk. MBANK is currently generating about -0.08 per unit of risk. If you would invest  4.60  in PT Ace Hardware on September 28, 2024 and sell it today you would lose (0.55) from holding PT Ace Hardware or give up 11.96% of portfolio value over 90 days.

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

PT Ace Hardware  vs.  MBANK

PT Ace Hardware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Ace Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MBANK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MBANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PT Ace and MBANK

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

The idea behind PT Ace Hardware and MBANK 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.