Correlation Between Media Nusantara and First Media

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

By analyzing existing cross correlation between Media Nusantara Citra and First Media Tbk, you can compare the effects of market volatilities on Media Nusantara and First Media 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 Media Nusantara with a short position of First Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Media Nusantara and First Media.

Diversification Opportunities for Media Nusantara and First Media

-0.64

Correlation Coefficient

Media Nusantara  First Media

Excellent diversification

The 3 months correlation between Media and First is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Media Nusantara Citra and First Media Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Media Tbk and Media Nusantara 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 Media Nusantara Citra are associated (or correlated) with First Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Media Tbk has no effect on the direction of Media Nusantara i.e., Media Nusantara and First Media go up and down completely randomly.

Pair Corralation between Media Nusantara and First Media

Assuming the 90 days trading horizon Media Nusantara Citra is expected to under-perform the First Media. But the stock apears to be less risky and, when comparing its historical volatility, Media Nusantara Citra is 1.55 times less risky than First Media. The stock trades about -0.04 of its potential returns per unit of risk. The First Media Tbk is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  6,100  in First Media Tbk on September 14, 2024 and sell it today you would earn a total of  3,400  from holding First Media Tbk or generate 55.74% return on investment over 90 days.

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

Media Nusantara Citra  vs.  First Media Tbk

Media Nusantara Citra

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Media Tbk

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Media Tbk are ranked lower than 21 (%) 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.

Pair Trading with Media Nusantara and First Media

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

The idea behind Media Nusantara Citra and First Media Tbk 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.