Correlation Between Mitra Adiperkasa and Kimia Farma

Can any of the company-specific risk be diversified away by investing in both Mitra Adiperkasa and Kimia Farma 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 Mitra Adiperkasa and Kimia Farma into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mitra Adiperkasa Tbk and Kimia Farma Persero, you can compare the effects of market volatilities on Mitra Adiperkasa and Kimia Farma 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 Mitra Adiperkasa with a short position of Kimia Farma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitra Adiperkasa and Kimia Farma.

Diversification Opportunities for Mitra Adiperkasa and Kimia Farma

0.87

Correlation Coefficient

Mitra Adiperkasa  Kimia Farma

Very poor diversification

The 3 months correlation between Mitra and Kimia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mitra Adiperkasa Tbk and Kimia Farma Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimia Farma Persero and Mitra Adiperkasa 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 Mitra Adiperkasa Tbk are associated (or correlated) with Kimia Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimia Farma Persero has no effect on the direction of Mitra Adiperkasa i.e., Mitra Adiperkasa and Kimia Farma go up and down completely randomly.

Pair Corralation between Mitra Adiperkasa and Kimia Farma

Assuming the 90 days trading horizon Mitra Adiperkasa Tbk is expected to under-perform the Kimia Farma. In addition to that, Mitra Adiperkasa is 1.53 times more volatile than Kimia Farma Persero. It trades about -0.07 of its total potential returns per unit of risk. Kimia Farma Persero is currently generating about 0.05 per unit of volatility. If you would invest  59,000  in Kimia Farma Persero on September 19, 2024 and sell it today you would earn a total of  1,000.00  from holding Kimia Farma Persero or generate 1.69% return on investment over 90 days.

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

Mitra Adiperkasa Tbk  vs.  Kimia Farma Persero

Mitra Adiperkasa Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitra Adiperkasa Tbk 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.

Kimia Farma Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimia Farma Persero 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.

Pair Trading with Mitra Adiperkasa and Kimia Farma

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

The idea behind Mitra Adiperkasa Tbk and Kimia Farma Persero 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.