Correlation Between Metrodata Electronics and Steel Pipe

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

By analyzing existing cross correlation between Metrodata Electronics Tbk and Steel Pipe Industry, you can compare the effects of market volatilities on Metrodata Electronics and Steel Pipe 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 Metrodata Electronics with a short position of Steel Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metrodata Electronics and Steel Pipe.

Diversification Opportunities for Metrodata Electronics and Steel Pipe

-0.1

Correlation Coefficient

Metrodata Electronics  Steel Pipe

Good diversification

The 3 months correlation between Metrodata and Steel is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Metrodata Electronics Tbk and Steel Pipe Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Pipe Industry and Metrodata Electronics 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 Metrodata Electronics Tbk are associated (or correlated) with Steel Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Pipe Industry has no effect on the direction of Metrodata Electronics i.e., Metrodata Electronics and Steel Pipe go up and down completely randomly.

Pair Corralation between Metrodata Electronics and Steel Pipe

Assuming the 90 days trading horizon Metrodata Electronics Tbk is expected to under-perform the Steel Pipe. But the stock apears to be less risky and, when comparing its historical volatility, Metrodata Electronics Tbk is 1.06 times less risky than Steel Pipe. The stock trades about -0.07 of its potential returns per unit of risk. The Steel Pipe Industry is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  28,600  in Steel Pipe Industry on September 18, 2024 and sell it today you would lose (400.00) from holding Steel Pipe Industry or give up 1.4% of portfolio value over 90 days.

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

Metrodata Electronics Tbk  vs.  Steel Pipe Industry

Metrodata Electronics Tbk

Risk-Adjusted Performance

1 of 100

Weak

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

Steel Pipe Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Pipe Industry 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 Metrodata Electronics and Steel Pipe

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

The idea behind Metrodata Electronics Tbk and Steel Pipe Industry 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.