Correlation Between Mitrabara Adiperdana and Pabrik Kertas

Can any of the company-specific risk be diversified away by investing in both Mitrabara Adiperdana and Pabrik Kertas 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 Mitrabara Adiperdana and Pabrik Kertas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mitrabara Adiperdana PT and Pabrik Kertas Tjiwi, you can compare the effects of market volatilities on Mitrabara Adiperdana and Pabrik Kertas 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 Mitrabara Adiperdana with a short position of Pabrik Kertas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitrabara Adiperdana and Pabrik Kertas.

Diversification Opportunities for Mitrabara Adiperdana and Pabrik Kertas

-0.93

Correlation Coefficient

Mitrabara Adiperdana  Pabrik Kertas

Pay attention - limited upside

The 3 months correlation between Mitrabara and Pabrik is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mitrabara Adiperdana PT and Pabrik Kertas Tjiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pabrik Kertas Tjiwi and Mitrabara Adiperdana 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 Mitrabara Adiperdana PT are associated (or correlated) with Pabrik Kertas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pabrik Kertas Tjiwi has no effect on the direction of Mitrabara Adiperdana i.e., Mitrabara Adiperdana and Pabrik Kertas go up and down completely randomly.

Pair Corralation between Mitrabara Adiperdana and Pabrik Kertas

Assuming the 90 days trading horizon Mitrabara Adiperdana PT is expected to under-perform the Pabrik Kertas. But the stock apears to be less risky and, when comparing its historical volatility, Mitrabara Adiperdana PT is 1.99 times less risky than Pabrik Kertas. The stock trades about -0.27 of its potential returns per unit of risk. The Pabrik Kertas Tjiwi is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  882,500  in Pabrik Kertas Tjiwi on March 19, 2024 and sell it today you would lose (42,500) from holding Pabrik Kertas Tjiwi or give up 4.82% of portfolio value over 90 days.

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

Mitrabara Adiperdana PT  vs.  Pabrik Kertas Tjiwi

Mitrabara Adiperdana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitrabara Adiperdana PT 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 basic indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pabrik Kertas Tjiwi

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pabrik Kertas Tjiwi are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pabrik Kertas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitrabara Adiperdana and Pabrik Kertas

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

The idea behind Mitrabara Adiperdana PT and Pabrik Kertas Tjiwi 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.