Correlation Between Medikaloka Hermina and Itama Ranoraya

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

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

Diversification Opportunities for Medikaloka Hermina and Itama Ranoraya

0.24

Correlation Coefficient

Medikaloka Hermina  Itama Ranoraya

Modest diversification

The 3 months correlation between Medikaloka and Itama is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Medikaloka Hermina PT and Itama Ranoraya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itama Ranoraya and Medikaloka Hermina 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 Medikaloka Hermina PT are associated (or correlated) with Itama Ranoraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itama Ranoraya has no effect on the direction of Medikaloka Hermina i.e., Medikaloka Hermina and Itama Ranoraya go up and down completely randomly.

Pair Corralation between Medikaloka Hermina and Itama Ranoraya

Assuming the 90 days trading horizon Medikaloka Hermina PT is expected to generate 1.74 times more return on investment than Itama Ranoraya. However, Medikaloka Hermina is 1.74 times more volatile than Itama Ranoraya. It trades about 0.06 of its potential returns per unit of risk. Itama Ranoraya is currently generating about -0.22 per unit of risk. If you would invest  140,500  in Medikaloka Hermina PT on September 17, 2024 and sell it today you would earn a total of  9,500  from holding Medikaloka Hermina PT or generate 6.76% return on investment over 90 days.

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

Medikaloka Hermina PT  vs.  Itama Ranoraya

Medikaloka Hermina

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medikaloka Hermina PT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Medikaloka Hermina may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Itama Ranoraya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itama Ranoraya 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 Medikaloka Hermina and Itama Ranoraya

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

The idea behind Medikaloka Hermina PT and Itama Ranoraya 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.