Correlation Between Hensel Davest and Multipolar Technology

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

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

Diversification Opportunities for Hensel Davest and Multipolar Technology

-0.58

Correlation Coefficient

Hensel Davest  Multipolar Technology

Excellent diversification

The 3 months correlation between Hensel and Multipolar is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hensel Davest Indonesia and Multipolar Technology Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multipolar Technology Tbk and Hensel Davest 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 Hensel Davest Indonesia are associated (or correlated) with Multipolar Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multipolar Technology Tbk has no effect on the direction of Hensel Davest i.e., Hensel Davest and Multipolar Technology go up and down completely randomly.

Pair Corralation between Hensel Davest and Multipolar Technology

Assuming the 90 days trading horizon Hensel Davest Indonesia is expected to generate 10.17 times more return on investment than Multipolar Technology. However, Hensel Davest is 10.17 times more volatile than Multipolar Technology Tbk. It trades about 0.04 of its potential returns per unit of risk. Multipolar Technology Tbk is currently generating about 0.14 per unit of risk. If you would invest  6,400  in Hensel Davest Indonesia on September 3, 2024 and sell it today you would lose (4,900) from holding Hensel Davest Indonesia or give up 76.56% of portfolio value over 90 days.

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

Hensel Davest Indonesia  vs.  Multipolar Technology Tbk

Hensel Davest Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Multipolar Technology Tbk

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Multipolar Technology Tbk are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multipolar Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hensel Davest and Multipolar Technology

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

The idea behind Hensel Davest Indonesia and Multipolar Technology 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.