Correlation Between Optima Prima and Metro Healthcare

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

By analyzing existing cross correlation between Optima Prima Metal and Metro Healthcare Indonesia, you can compare the effects of market volatilities on Optima Prima and Metro Healthcare 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 Optima Prima with a short position of Metro Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Prima and Metro Healthcare.

Diversification Opportunities for Optima Prima and Metro Healthcare

-0.89

Correlation Coefficient

Optima Prima  Metro Healthcare

Pay attention - limited upside

The 3 months correlation between Optima and Metro is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Optima Prima Metal and Metro Healthcare Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Healthcare Ind and Optima Prima 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 Optima Prima Metal are associated (or correlated) with Metro Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Healthcare Ind has no effect on the direction of Optima Prima i.e., Optima Prima and Metro Healthcare go up and down completely randomly.

Pair Corralation between Optima Prima and Metro Healthcare

Assuming the 90 days trading horizon Optima Prima Metal is expected to under-perform the Metro Healthcare. In addition to that, Optima Prima is 1.2 times more volatile than Metro Healthcare Indonesia. It trades about -0.35 of its total potential returns per unit of risk. Metro Healthcare Indonesia is currently generating about 0.36 per unit of volatility. If you would invest  9,300  in Metro Healthcare Indonesia on September 19, 2024 and sell it today you would earn a total of  8,600  from holding Metro Healthcare Indonesia or generate 92.47% return on investment over 90 days.

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

Optima Prima Metal  vs.  Metro Healthcare Indonesia

Optima Prima Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Prima Metal 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.

Metro Healthcare Ind

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Metro Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optima Prima and Metro Healthcare

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

The idea behind Optima Prima Metal and Metro Healthcare Indonesia 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.