Correlation Between DCI Indonesia and Bank Net

Can any of the company-specific risk be diversified away by investing in both DCI Indonesia and Bank Net 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 DCI Indonesia and Bank Net into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for DCI Indonesia and Bank Net

-0.01

Correlation Coefficient

DCI Indonesia  Bank Net

Good diversification

The 3 months correlation between DCI and Bank is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding DCI Indonesia Tbk and Bank Net Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Net Indonesia and DCI Indonesia 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 DCI Indonesia Tbk are associated (or correlated) with Bank Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Net Indonesia has no effect on the direction of DCI Indonesia i.e., DCI Indonesia and Bank Net go up and down completely randomly.

Pair Corralation between DCI Indonesia and Bank Net

Assuming the 90 days trading horizon DCI Indonesia Tbk is expected to under-perform the Bank Net. In addition to that, DCI Indonesia is 1.29 times more volatile than Bank Net Indonesia. It trades about -0.19 of its total potential returns per unit of risk. Bank Net Indonesia is currently generating about -0.05 per unit of volatility. If you would invest  85,500  in Bank Net Indonesia on September 14, 2024 and sell it today you would lose (5,500) from holding Bank Net Indonesia or give up 6.43% of portfolio value over 90 days.

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

DCI Indonesia Tbk  vs.  Bank Net Indonesia

DCI Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCI Indonesia 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank Net Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Net Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Net 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 DCI Indonesia and Bank Net

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

The idea behind DCI Indonesia Tbk and Bank Net Indonesia 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.