Correlation Between Multi Indocitra and Jakarta Setiabudi

Can any of the company-specific risk be diversified away by investing in both Multi Indocitra and Jakarta Setiabudi 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 Multi Indocitra and Jakarta Setiabudi into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Multi Indocitra and Jakarta Setiabudi

0.57

Correlation Coefficient

Multi Indocitra  Jakarta Setiabudi

Very weak diversification

The 3 months correlation between Multi and Jakarta is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Multi Indocitra Tbk and Jakarta Setiabudi Internasiona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Setiabudi and Multi Indocitra 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 Multi Indocitra Tbk are associated (or correlated) with Jakarta Setiabudi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Setiabudi has no effect on the direction of Multi Indocitra i.e., Multi Indocitra and Jakarta Setiabudi go up and down completely randomly.

Pair Corralation between Multi Indocitra and Jakarta Setiabudi

Assuming the 90 days trading horizon Multi Indocitra Tbk is expected to under-perform the Jakarta Setiabudi. But the stock apears to be less risky and, when comparing its historical volatility, Multi Indocitra Tbk is 9.14 times less risky than Jakarta Setiabudi. The stock trades about -0.01 of its potential returns per unit of risk. The Jakarta Setiabudi Internasional is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  185,500  in Jakarta Setiabudi Internasional on September 18, 2024 and sell it today you would earn a total of  894,500  from holding Jakarta Setiabudi Internasional or generate 482.21% return on investment over 90 days.

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

Multi Indocitra Tbk  vs.  Jakarta Setiabudi Internasiona

Multi Indocitra Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jakarta Setiabudi

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Setiabudi Internasional are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Setiabudi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multi Indocitra and Jakarta Setiabudi

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

The idea behind Multi Indocitra Tbk and Jakarta Setiabudi Internasional 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.