Correlation Between Pelangi Indah and PT Mulia

Can any of the company-specific risk be diversified away by investing in both Pelangi Indah and PT Mulia 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 Pelangi Indah and PT Mulia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pelangi Indah Canindo and PT Mulia Industrindo, you can compare the effects of market volatilities on Pelangi Indah and PT Mulia 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 Pelangi Indah with a short position of PT Mulia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pelangi Indah and PT Mulia.

Diversification Opportunities for Pelangi Indah and PT Mulia

-0.18

Correlation Coefficient

Pelangi Indah  PT Mulia

Good diversification

The 3 months correlation between Pelangi and MLIA is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Pelangi Indah Canindo and PT Mulia Industrindo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Mulia Industrindo and Pelangi Indah 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 Pelangi Indah Canindo are associated (or correlated) with PT Mulia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Mulia Industrindo has no effect on the direction of Pelangi Indah i.e., Pelangi Indah and PT Mulia go up and down completely randomly.

Pair Corralation between Pelangi Indah and PT Mulia

Assuming the 90 days trading horizon Pelangi Indah Canindo is expected to generate 3.12 times more return on investment than PT Mulia. However, Pelangi Indah is 3.12 times more volatile than PT Mulia Industrindo. It trades about -0.01 of its potential returns per unit of risk. PT Mulia Industrindo is currently generating about -0.05 per unit of risk. If you would invest  27,000  in Pelangi Indah Canindo on September 14, 2024 and sell it today you would lose (12,800) from holding Pelangi Indah Canindo or give up 47.41% of portfolio value over 90 days.

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

Pelangi Indah Canindo  vs.  PT Mulia Industrindo

Pelangi Indah Canindo

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pelangi Indah Canindo are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pelangi Indah disclosed solid returns over the last few months and may actually be approaching a breakup point.

PT Mulia Industrindo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Mulia Industrindo 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.

Pair Trading with Pelangi Indah and PT Mulia

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

The idea behind Pelangi Indah Canindo and PT Mulia Industrindo 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 Stocks Directory module to find actively traded stocks across global markets.