Correlation Between Hanjaya Mandala and United Tractors

Can any of the company-specific risk be diversified away by investing in both Hanjaya Mandala and United Tractors 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 Hanjaya Mandala and United Tractors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanjaya Mandala Sampoerna and United Tractors Tbk, you can compare the effects of market volatilities on Hanjaya Mandala and United Tractors 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 Hanjaya Mandala with a short position of United Tractors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanjaya Mandala and United Tractors.

Diversification Opportunities for Hanjaya Mandala and United Tractors

-0.42

Correlation Coefficient

Hanjaya Mandala  United Tractors

Very good diversification

The 3 months correlation between Hanjaya and United is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hanjaya Mandala Sampoerna and United Tractors Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Tractors Tbk and Hanjaya Mandala 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 Hanjaya Mandala Sampoerna are associated (or correlated) with United Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Tractors Tbk has no effect on the direction of Hanjaya Mandala i.e., Hanjaya Mandala and United Tractors go up and down completely randomly.

Pair Corralation between Hanjaya Mandala and United Tractors

Assuming the 90 days trading horizon Hanjaya Mandala Sampoerna is expected to under-perform the United Tractors. But the stock apears to be less risky and, when comparing its historical volatility, Hanjaya Mandala Sampoerna is 1.53 times less risky than United Tractors. The stock trades about -0.21 of its potential returns per unit of risk. The United Tractors Tbk is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,707,500  in United Tractors Tbk on August 23, 2024 and sell it today you would lose (65,000) from holding United Tractors Tbk or give up 2.4% of portfolio value over 90 days.

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

Hanjaya Mandala Sampoerna  vs.  United Tractors Tbk

Hanjaya Mandala Sampoerna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanjaya Mandala Sampoerna 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.

United Tractors Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Tractors Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, United Tractors 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 Hanjaya Mandala and United Tractors

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

The idea behind Hanjaya Mandala Sampoerna and United Tractors 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.