Correlation Between Matahari Putra and Hero Supermarket

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

By analyzing existing cross correlation between Matahari Putra Prima and Hero Supermarket Tbk, you can compare the effects of market volatilities on Matahari Putra and Hero Supermarket 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 Matahari Putra with a short position of Hero Supermarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matahari Putra and Hero Supermarket.

Diversification Opportunities for Matahari Putra and Hero Supermarket

-0.14

Correlation Coefficient

Matahari Putra  Hero Supermarket

Good diversification

The 3 months correlation between Matahari and Hero is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Matahari Putra Prima and Hero Supermarket Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hero Supermarket Tbk and Matahari Putra 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 Matahari Putra Prima are associated (or correlated) with Hero Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hero Supermarket Tbk has no effect on the direction of Matahari Putra i.e., Matahari Putra and Hero Supermarket go up and down completely randomly.

Pair Corralation between Matahari Putra and Hero Supermarket

Assuming the 90 days trading horizon Matahari Putra Prima is expected to under-perform the Hero Supermarket. In addition to that, Matahari Putra is 2.65 times more volatile than Hero Supermarket Tbk. It trades about -0.2 of its total potential returns per unit of risk. Hero Supermarket Tbk is currently generating about -0.2 per unit of volatility. If you would invest  64,500  in Hero Supermarket Tbk on September 13, 2024 and sell it today you would lose (6,000) from holding Hero Supermarket Tbk or give up 9.3% of portfolio value over 90 days.

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

Matahari Putra Prima  vs.  Hero Supermarket Tbk

Matahari Putra Prima

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matahari Putra Prima are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Matahari Putra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Hero Supermarket Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hero Supermarket 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.

Pair Trading with Matahari Putra and Hero Supermarket

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

The idea behind Matahari Putra Prima and Hero Supermarket 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.