Correlation Between Alumindo Light and Metro Healthcare

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

By analyzing existing cross correlation between Alumindo Light Metal and Metro Healthcare Indonesia, you can compare the effects of market volatilities on Alumindo Light and Metro Healthcare 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 Alumindo Light with a short position of Metro Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumindo Light and Metro Healthcare.

Diversification Opportunities for Alumindo Light and Metro Healthcare

0.52

Correlation Coefficient

Alumindo Light  Metro Healthcare

Very weak diversification

The 3 months correlation between Alumindo and Metro is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Alumindo Light Metal and Metro Healthcare Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Healthcare Ind and Alumindo Light 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 Alumindo Light Metal are associated (or correlated) with Metro Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Healthcare Ind has no effect on the direction of Alumindo Light i.e., Alumindo Light and Metro Healthcare go up and down completely randomly.

Pair Corralation between Alumindo Light and Metro Healthcare

Assuming the 90 days trading horizon Alumindo Light Metal is expected to under-perform the Metro Healthcare. In addition to that, Alumindo Light is 1.05 times more volatile than Metro Healthcare Indonesia. It trades about -0.09 of its total potential returns per unit of risk. Metro Healthcare Indonesia is currently generating about 0.03 per unit of volatility. If you would invest  15,700  in Metro Healthcare Indonesia on September 19, 2024 and sell it today you would earn a total of  2,200  from holding Metro Healthcare Indonesia or generate 14.01% return on investment over 90 days.

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

Alumindo Light Metal  vs.  Metro Healthcare Indonesia

Alumindo Light Metal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alumindo Light Metal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Alumindo Light disclosed solid returns over the last few months and may actually be approaching a breakup point.

Metro Healthcare Ind

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Metro Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alumindo Light and Metro Healthcare

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

The idea behind Alumindo Light Metal and Metro Healthcare 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.