Correlation Between First Media and Cahayaputra Asa

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Can any of the company-specific risk be diversified away by investing in both First Media and Cahayaputra Asa 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 First Media and Cahayaputra Asa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Media Tbk and Cahayaputra Asa Keramik, you can compare the effects of market volatilities on First Media and Cahayaputra Asa 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 First Media with a short position of Cahayaputra Asa. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Media and Cahayaputra Asa.

Diversification Opportunities for First Media and Cahayaputra Asa

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between First and Cahayaputra is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding First Media Tbk and Cahayaputra Asa Keramik in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cahayaputra Asa Keramik and First Media 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 First Media Tbk are associated (or correlated) with Cahayaputra Asa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cahayaputra Asa Keramik has no effect on the direction of First Media i.e., First Media and Cahayaputra Asa go up and down completely randomly.

Pair Corralation between First Media and Cahayaputra Asa

Assuming the 90 days trading horizon First Media Tbk is expected to generate 1.34 times more return on investment than Cahayaputra Asa. However, First Media is 1.34 times more volatile than Cahayaputra Asa Keramik. It trades about 0.25 of its potential returns per unit of risk. Cahayaputra Asa Keramik is currently generating about -0.04 per unit of risk. If you would invest  6,200  in First Media Tbk on September 20, 2024 and sell it today you would earn a total of  3,200  from holding First Media Tbk or generate 51.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

First Media Tbk  vs.  Cahayaputra Asa Keramik

 Performance 
       Timeline  
First Media Tbk 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in First Media Tbk are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, First Media disclosed solid returns over the last few months and may actually be approaching a breakup point.
Cahayaputra Asa Keramik 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cahayaputra Asa Keramik has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Cahayaputra Asa is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First Media and Cahayaputra Asa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Media and Cahayaputra Asa

The main advantage of trading using opposite First Media and Cahayaputra Asa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Media position performs unexpectedly, Cahayaputra Asa 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 Cahayaputra Asa will offset losses from the drop in Cahayaputra Asa's long position.
The idea behind First Media Tbk and Cahayaputra Asa Keramik 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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