Correlation Between Bank Mega and Ladangbaja Murni

Can any of the company-specific risk be diversified away by investing in both Bank Mega and Ladangbaja Murni 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 Bank Mega and Ladangbaja Murni into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Mega Tbk and Ladangbaja Murni PT, you can compare the effects of market volatilities on Bank Mega and Ladangbaja Murni 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 Bank Mega with a short position of Ladangbaja Murni. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mega and Ladangbaja Murni.

Diversification Opportunities for Bank Mega and Ladangbaja Murni

0.74

Correlation Coefficient

Bank Mega  Ladangbaja Murni

Poor diversification

The 3 months correlation between Bank and Ladangbaja is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mega Tbk and Ladangbaja Murni PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladangbaja Murni and Bank Mega 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 Bank Mega Tbk are associated (or correlated) with Ladangbaja Murni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladangbaja Murni has no effect on the direction of Bank Mega i.e., Bank Mega and Ladangbaja Murni go up and down completely randomly.

Pair Corralation between Bank Mega and Ladangbaja Murni

Assuming the 90 days trading horizon Bank Mega Tbk is expected to generate 0.11 times more return on investment than Ladangbaja Murni. However, Bank Mega Tbk is 8.96 times less risky than Ladangbaja Murni. It trades about -0.18 of its potential returns per unit of risk. Ladangbaja Murni PT is currently generating about -0.12 per unit of risk. If you would invest  499,000  in Bank Mega Tbk on September 16, 2024 and sell it today you would lose (44,000) from holding Bank Mega Tbk or give up 8.82% of portfolio value over 90 days.

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

Bank Mega Tbk  vs.  Ladangbaja Murni PT

Bank Mega Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Mega Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Ladangbaja Murni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ladangbaja Murni PT 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 Bank Mega and Ladangbaja Murni

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

The idea behind Bank Mega Tbk and Ladangbaja Murni 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.