Correlation Between Provident Agro and Matahari Putra

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

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

Diversification Opportunities for Provident Agro and Matahari Putra

-0.25

Correlation Coefficient

Provident Agro  Matahari Putra

Very good diversification

The 3 months correlation between Provident and Matahari is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Provident Agro Tbk and Matahari Putra Prima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matahari Putra Prima and Provident Agro 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 Provident Agro Tbk are associated (or correlated) with Matahari Putra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matahari Putra Prima has no effect on the direction of Provident Agro i.e., Provident Agro and Matahari Putra go up and down completely randomly.

Pair Corralation between Provident Agro and Matahari Putra

Assuming the 90 days trading horizon Provident Agro Tbk is expected to under-perform the Matahari Putra. But the stock apears to be less risky and, when comparing its historical volatility, Provident Agro Tbk is 4.76 times less risky than Matahari Putra. The stock trades about -0.07 of its potential returns per unit of risk. The Matahari Putra Prima is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,100  in Matahari Putra Prima on September 14, 2024 and sell it today you would earn a total of  1,800  from holding Matahari Putra Prima or generate 35.29% return on investment over 90 days.

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

Provident Agro Tbk  vs.  Matahari Putra Prima

Provident Agro Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Provident Agro 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.

Matahari Putra Prima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matahari Putra Prima are ranked lower than 7 (%) 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.

Pair Trading with Provident Agro and Matahari Putra

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

The idea behind Provident Agro Tbk and Matahari Putra Prima 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.