Correlation Between Jaya Konstruksi and PT Mulia

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

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

Diversification Opportunities for Jaya Konstruksi and PT Mulia

-0.05

Correlation Coefficient

Jaya Konstruksi  PT Mulia

Good diversification

The 3 months correlation between Jaya and MLIA is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jaya Konstruksi Manggala 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 Jaya Konstruksi 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 Jaya Konstruksi Manggala 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 Jaya Konstruksi i.e., Jaya Konstruksi and PT Mulia go up and down completely randomly.

Pair Corralation between Jaya Konstruksi and PT Mulia

Assuming the 90 days trading horizon Jaya Konstruksi Manggala is expected to under-perform the PT Mulia. In addition to that, Jaya Konstruksi is 1.49 times more volatile than PT Mulia Industrindo. It trades about -0.37 of its total potential returns per unit of risk. PT Mulia Industrindo is currently generating about -0.39 per unit of volatility. If you would invest  40,200  in PT Mulia Industrindo on February 5, 2024 and sell it today you would lose (3,000) from holding PT Mulia Industrindo or give up 7.46% of portfolio value over 90 days.

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

Jaya Konstruksi Manggala  vs.  PT Mulia Industrindo

Jaya Konstruksi Manggala

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jaya Konstruksi Manggala are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Jaya Konstruksi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 basic indicators 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 Jaya Konstruksi and PT Mulia

The main advantage of trading using opposite Jaya Konstruksi and PT Mulia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jaya Konstruksi 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 Jaya Konstruksi Manggala 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.