Correlation Between Cisarua Mountain and Wahana Inti

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

By analyzing existing cross correlation between Cisarua Mountain Dairy and Wahana Inti MakmurTbk, you can compare the effects of market volatilities on Cisarua Mountain and Wahana Inti 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 Cisarua Mountain with a short position of Wahana Inti. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisarua Mountain and Wahana Inti.

Diversification Opportunities for Cisarua Mountain and Wahana Inti

-0.04

Correlation Coefficient

Cisarua Mountain  Wahana Inti

Good diversification

The 3 months correlation between Cisarua and Wahana is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cisarua Mountain Dairy and Wahana Inti MakmurTbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahana Inti MakmurTbk and Cisarua Mountain 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 Cisarua Mountain Dairy are associated (or correlated) with Wahana Inti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahana Inti MakmurTbk has no effect on the direction of Cisarua Mountain i.e., Cisarua Mountain and Wahana Inti go up and down completely randomly.

Pair Corralation between Cisarua Mountain and Wahana Inti

Assuming the 90 days trading horizon Cisarua Mountain Dairy is expected to generate 0.5 times more return on investment than Wahana Inti. However, Cisarua Mountain Dairy is 1.99 times less risky than Wahana Inti. It trades about -0.04 of its potential returns per unit of risk. Wahana Inti MakmurTbk is currently generating about -0.11 per unit of risk. If you would invest  550,000  in Cisarua Mountain Dairy on September 16, 2024 and sell it today you would lose (35,000) from holding Cisarua Mountain Dairy or give up 6.36% of portfolio value over 90 days.

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

Cisarua Mountain Dairy  vs.  Wahana Inti MakmurTbk

Cisarua Mountain Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wahana Inti MakmurTbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wahana Inti MakmurTbk 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Cisarua Mountain and Wahana Inti

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

The idea behind Cisarua Mountain Dairy and Wahana Inti MakmurTbk 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 Global Correlations module to find global opportunities by holding instruments from different markets.