Correlation Between Meta Epsi and Jakarta Setiabudi

Can any of the company-specific risk be diversified away by investing in both Meta Epsi 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 Meta Epsi and Jakarta Setiabudi 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 Jakarta Setiabudi Internasional, you can compare the effects of market volatilities on Meta Epsi 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 Meta Epsi with a short position of Jakarta Setiabudi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Epsi and Jakarta Setiabudi.

Diversification Opportunities for Meta Epsi and Jakarta Setiabudi

-0.61

Correlation Coefficient

Meta Epsi  Jakarta Setiabudi

Excellent diversification

The 3 months correlation between Meta and Jakarta is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Meta Epsi 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 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 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 Meta Epsi i.e., Meta Epsi and Jakarta Setiabudi go up and down completely randomly.

Pair Corralation between Meta Epsi and Jakarta Setiabudi

Assuming the 90 days trading horizon Meta Epsi Tbk is expected to under-perform the Jakarta Setiabudi. But the stock apears to be less risky and, when comparing its historical volatility, Meta Epsi Tbk is 2.43 times less risky than Jakarta Setiabudi. The stock trades about -0.12 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  188,000  in Jakarta Setiabudi Internasional on September 14, 2024 and sell it today you would earn a total of  892,000  from holding Jakarta Setiabudi Internasional or generate 474.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Meta Epsi Tbk  vs.  Jakarta Setiabudi Internasiona

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.

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 Meta Epsi and Jakarta Setiabudi

The main advantage of trading using opposite Meta Epsi and Jakarta Setiabudi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Epsi 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 Meta Epsi 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.