Correlation Between Modern Internasional and Tembaga Mulia

Can any of the company-specific risk be diversified away by investing in both Modern Internasional and Tembaga Mulia 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 Modern Internasional and Tembaga Mulia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Modern Internasional Tbk and Tembaga Mulia Semanan, you can compare the effects of market volatilities on Modern Internasional and Tembaga Mulia 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 Modern Internasional with a short position of Tembaga Mulia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modern Internasional and Tembaga Mulia.

Diversification Opportunities for Modern Internasional and Tembaga Mulia

-0.54

Correlation Coefficient

Modern Internasional  Tembaga Mulia

Excellent diversification

The 3 months correlation between Modern and Tembaga is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Modern Internasional Tbk and Tembaga Mulia Semanan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tembaga Mulia Semanan and Modern Internasional 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 Modern Internasional Tbk are associated (or correlated) with Tembaga Mulia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tembaga Mulia Semanan has no effect on the direction of Modern Internasional i.e., Modern Internasional and Tembaga Mulia go up and down completely randomly.

Pair Corralation between Modern Internasional and Tembaga Mulia

Assuming the 90 days trading horizon Modern Internasional Tbk is expected to under-perform the Tembaga Mulia. But the stock apears to be less risky and, when comparing its historical volatility, Modern Internasional Tbk is 6.31 times less risky than Tembaga Mulia. The stock trades about -0.02 of its potential returns per unit of risk. The Tembaga Mulia Semanan is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  74,540  in Tembaga Mulia Semanan on September 14, 2024 and sell it today you would earn a total of  16,460  from holding Tembaga Mulia Semanan or generate 22.08% return on investment over 90 days.

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

Modern Internasional Tbk  vs.  Tembaga Mulia Semanan

Modern Internasional Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Internasional Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Modern Internasional disclosed solid returns over the last few months and may actually be approaching a breakup point.

Tembaga Mulia Semanan

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tembaga Mulia Semanan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Tembaga Mulia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Modern Internasional and Tembaga Mulia

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

The idea behind Modern Internasional Tbk and Tembaga Mulia Semanan 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 Global Correlations module to find global opportunities by holding instruments from different markets.