Correlation Between Meta Epsi and Sepatu Bata

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

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

Diversification Opportunities for Meta Epsi and Sepatu Bata

0.72

Correlation Coefficient

Meta Epsi  Sepatu Bata

Poor diversification

The 3 months correlation between Meta and Sepatu is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Meta Epsi Tbk and Sepatu Bata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sepatu Bata Tbk and Meta Epsi 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 Meta Epsi Tbk are associated (or correlated) with Sepatu Bata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sepatu Bata Tbk has no effect on the direction of Meta Epsi i.e., Meta Epsi and Sepatu Bata go up and down completely randomly.

Pair Corralation between Meta Epsi and Sepatu Bata

Assuming the 90 days trading horizon Meta Epsi Tbk is expected to under-perform the Sepatu Bata. In addition to that, Meta Epsi is 2.88 times more volatile than Sepatu Bata Tbk. It trades about -0.11 of its total potential returns per unit of risk. Sepatu Bata Tbk is currently generating about -0.17 per unit of volatility. If you would invest  6,000  in Sepatu Bata Tbk on September 16, 2024 and sell it today you would lose (1,000.00) from holding Sepatu Bata Tbk or give up 16.67% of portfolio value over 90 days.

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

Meta Epsi Tbk  vs.  Sepatu Bata Tbk

Meta Epsi Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meta Epsi Tbk 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.

Sepatu Bata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sepatu Bata Tbk 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 Meta Epsi and Sepatu Bata

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

The idea behind Meta Epsi Tbk and Sepatu Bata 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.