Correlation Between PT MNC and Erajaya Swasembada

Can any of the company-specific risk be diversified away by investing in both PT MNC and Erajaya Swasembada 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 PT MNC and Erajaya Swasembada into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT MNC Energy and Erajaya Swasembada Tbk, you can compare the effects of market volatilities on PT MNC and Erajaya Swasembada 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 PT MNC with a short position of Erajaya Swasembada. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT MNC and Erajaya Swasembada.

Diversification Opportunities for PT MNC and Erajaya Swasembada

-0.59

Correlation Coefficient

PT MNC  Erajaya Swasembada

Excellent diversification

The 3 months correlation between IATA and Erajaya is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding PT MNC Energy and Erajaya Swasembada Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erajaya Swasembada Tbk and PT MNC 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 PT MNC Energy are associated (or correlated) with Erajaya Swasembada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erajaya Swasembada Tbk has no effect on the direction of PT MNC i.e., PT MNC and Erajaya Swasembada go up and down completely randomly.

Pair Corralation between PT MNC and Erajaya Swasembada

Assuming the 90 days trading horizon PT MNC Energy is expected to generate 1.53 times more return on investment than Erajaya Swasembada. However, PT MNC is 1.53 times more volatile than Erajaya Swasembada Tbk. It trades about 0.07 of its potential returns per unit of risk. Erajaya Swasembada Tbk is currently generating about -0.05 per unit of risk. If you would invest  4,400  in PT MNC Energy on September 26, 2024 and sell it today you would earn a total of  600.00  from holding PT MNC Energy or generate 13.64% return on investment over 90 days.

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

PT MNC Energy  vs.  Erajaya Swasembada Tbk

PT MNC Energy

Risk-Adjusted Performance

5 of 100

Modest

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

Erajaya Swasembada Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erajaya Swasembada 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.

Pair Trading with PT MNC and Erajaya Swasembada

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

The idea behind PT MNC Energy and Erajaya Swasembada 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.