Correlation Between Megapolitan Developments and Indosterling TechnomediaTbk

Can any of the company-specific risk be diversified away by investing in both Megapolitan Developments and Indosterling TechnomediaTbk 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 Megapolitan Developments and Indosterling TechnomediaTbk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Megapolitan Developments Tbk and Indosterling TechnomediaTbk, you can compare the effects of market volatilities on Megapolitan Developments and Indosterling TechnomediaTbk 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 Megapolitan Developments with a short position of Indosterling TechnomediaTbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megapolitan Developments and Indosterling TechnomediaTbk.

Diversification Opportunities for Megapolitan Developments and Indosterling TechnomediaTbk

0.0

Correlation Coefficient

Megapolitan Developments  Indosterling TechnomediaTbk

Pay attention - limited upside

The 3 months correlation between Megapolitan and Indosterling is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Megapolitan Developments Tbk and Indosterling TechnomediaTbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indosterling TechnomediaTbk and Megapolitan Developments 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 Megapolitan Developments Tbk are associated (or correlated) with Indosterling TechnomediaTbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indosterling TechnomediaTbk has no effect on the direction of Megapolitan Developments i.e., Megapolitan Developments and Indosterling TechnomediaTbk go up and down completely randomly.

Pair Corralation between Megapolitan Developments and Indosterling TechnomediaTbk

Assuming the 90 days trading horizon Megapolitan Developments Tbk is expected to generate 0.92 times more return on investment than Indosterling TechnomediaTbk. However, Megapolitan Developments Tbk is 1.08 times less risky than Indosterling TechnomediaTbk. It trades about -0.01 of its potential returns per unit of risk. Indosterling TechnomediaTbk is currently generating about -0.24 per unit of risk. If you would invest  15,500  in Megapolitan Developments Tbk on February 6, 2024 and sell it today you would lose (5,600) from holding Megapolitan Developments Tbk or give up 36.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Megapolitan Developments Tbk  vs.  Indosterling TechnomediaTbk

Megapolitan Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megapolitan Developments Tbk 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 June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Indosterling TechnomediaTbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indosterling TechnomediaTbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Indosterling TechnomediaTbk 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 Megapolitan Developments and Indosterling TechnomediaTbk

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

The idea behind Megapolitan Developments Tbk and Indosterling TechnomediaTbk 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.