Correlation Between Provident Agro and Mayora Indah

Can any of the company-specific risk be diversified away by investing in both Provident Agro and Mayora Indah 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 Mayora Indah 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 Mayora Indah Tbk, you can compare the effects of market volatilities on Provident Agro and Mayora Indah 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 Mayora Indah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Agro and Mayora Indah.

Diversification Opportunities for Provident Agro and Mayora Indah

0.22

Correlation Coefficient

Provident Agro  Mayora Indah

Modest diversification

The 3 months correlation between Provident and Mayora is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Provident Agro Tbk and Mayora Indah Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayora Indah Tbk 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 Mayora Indah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayora Indah Tbk has no effect on the direction of Provident Agro i.e., Provident Agro and Mayora Indah go up and down completely randomly.

Pair Corralation between Provident Agro and Mayora Indah

Assuming the 90 days trading horizon Provident Agro Tbk is expected to under-perform the Mayora Indah. But the stock apears to be less risky and, when comparing its historical volatility, Provident Agro Tbk is 1.02 times less risky than Mayora Indah. The stock trades about -0.05 of its potential returns per unit of risk. The Mayora Indah Tbk is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  278,000  in Mayora Indah Tbk on September 19, 2024 and sell it today you would lose (5,000) from holding Mayora Indah Tbk or give up 1.8% of portfolio value over 90 days.

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

Provident Agro Tbk  vs.  Mayora Indah Tbk

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 quite persistent forward-looking signals, Provident Agro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Mayora Indah Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mayora Indah Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mayora Indah is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Provident Agro and Mayora Indah

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

The idea behind Provident Agro Tbk and Mayora Indah 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.