Correlation Between Hero Supermarket and Electronic City

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

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

Diversification Opportunities for Hero Supermarket and Electronic City

-0.46

Correlation Coefficient

Hero Supermarket  Electronic City

Very good diversification

The 3 months correlation between Hero and Electronic is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hero Supermarket Tbk and Electronic City Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic City Indonesia and Hero Supermarket 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 Hero Supermarket Tbk are associated (or correlated) with Electronic City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic City Indonesia has no effect on the direction of Hero Supermarket i.e., Hero Supermarket and Electronic City go up and down completely randomly.

Pair Corralation between Hero Supermarket and Electronic City

Assuming the 90 days trading horizon Hero Supermarket Tbk is expected to under-perform the Electronic City. But the stock apears to be less risky and, when comparing its historical volatility, Hero Supermarket Tbk is 3.78 times less risky than Electronic City. The stock trades about -0.09 of its potential returns per unit of risk. The Electronic City Indonesia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  24,600  in Electronic City Indonesia on September 14, 2024 and sell it today you would earn a total of  6,200  from holding Electronic City Indonesia or generate 25.2% return on investment over 90 days.

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

Hero Supermarket Tbk  vs.  Electronic City Indonesia

Hero Supermarket Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hero Supermarket Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Electronic City Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic City Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Electronic City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hero Supermarket and Electronic City

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

The idea behind Hero Supermarket Tbk and Electronic City 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.