Correlation Between PT MNC and Multipolar Technology

Can any of the company-specific risk be diversified away by investing in both PT MNC 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 PT MNC and Multipolar Technology 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 Multipolar Technology Tbk, you can compare the effects of market volatilities on PT MNC 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 PT MNC with a short position of Multipolar Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT MNC and Multipolar Technology.

Diversification Opportunities for PT MNC and Multipolar Technology

0.18

Correlation Coefficient

PT MNC  Multipolar Technology

Average diversification

The 3 months correlation between IATA and Multipolar is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PT MNC Energy 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 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 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 PT MNC i.e., PT MNC and Multipolar Technology go up and down completely randomly.

Pair Corralation between PT MNC and Multipolar Technology

Assuming the 90 days trading horizon PT MNC is expected to generate 13.74 times less return on investment than Multipolar Technology. But when comparing it to its historical volatility, PT MNC Energy is 2.66 times less risky than Multipolar Technology. It trades about 0.05 of its potential returns per unit of risk. Multipolar Technology Tbk is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  433,000  in Multipolar Technology Tbk on September 24, 2024 and sell it today you would earn a total of  1,367,000  from holding Multipolar Technology Tbk or generate 315.7% return on investment over 90 days.

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

PT MNC Energy  vs.  Multipolar Technology Tbk

PT MNC Energy

Risk-Adjusted Performance

4 of 100

Insignificant

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

Multipolar Technology Tbk

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multipolar Technology Tbk are ranked lower than 22 (%) 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 PT MNC and Multipolar Technology

The main advantage of trading using opposite PT MNC and Multipolar Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT MNC 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 PT MNC Energy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.