Correlation Between Itama Ranoraya and Medikaloka Hermina

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

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

Diversification Opportunities for Itama Ranoraya and Medikaloka Hermina

0.24

Correlation Coefficient

Itama Ranoraya  Medikaloka Hermina

Modest diversification

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

Pair Corralation between Itama Ranoraya and Medikaloka Hermina

Assuming the 90 days trading horizon Itama Ranoraya is expected to under-perform the Medikaloka Hermina. But the stock apears to be less risky and, when comparing its historical volatility, Itama Ranoraya is 1.74 times less risky than Medikaloka Hermina. The stock trades about -0.22 of its potential returns per unit of risk. The Medikaloka Hermina PT is currently generating about 0.06 of returns per unit of risk over similar time horizon. 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

Itama Ranoraya  vs.  Medikaloka Hermina PT

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.

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.

Pair Trading with Itama Ranoraya and Medikaloka Hermina

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

The idea behind Itama Ranoraya and Medikaloka Hermina PT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.