Correlation Between Dharma Satya and Austindo Nusantara

Can any of the company-specific risk be diversified away by investing in both Dharma Satya and Austindo Nusantara 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 Dharma Satya and Austindo Nusantara into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dharma Satya Nusantara and Austindo Nusantara Jaya, you can compare the effects of market volatilities on Dharma Satya and Austindo Nusantara 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 Dharma Satya with a short position of Austindo Nusantara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dharma Satya and Austindo Nusantara.

Diversification Opportunities for Dharma Satya and Austindo Nusantara

0.85

Correlation Coefficient

Dharma Satya  Austindo Nusantara

Very poor diversification

The 3 months correlation between Dharma and Austindo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dharma Satya Nusantara and Austindo Nusantara Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austindo Nusantara Jaya and Dharma Satya 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 Dharma Satya Nusantara are associated (or correlated) with Austindo Nusantara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austindo Nusantara Jaya has no effect on the direction of Dharma Satya i.e., Dharma Satya and Austindo Nusantara go up and down completely randomly.

Pair Corralation between Dharma Satya and Austindo Nusantara

Assuming the 90 days trading horizon Dharma Satya Nusantara is expected to generate 3.41 times more return on investment than Austindo Nusantara. However, Dharma Satya is 3.41 times more volatile than Austindo Nusantara Jaya. It trades about 0.16 of its potential returns per unit of risk. Austindo Nusantara Jaya is currently generating about 0.1 per unit of risk. If you would invest  77,500  in Dharma Satya Nusantara on September 4, 2024 and sell it today you would earn a total of  34,500  from holding Dharma Satya Nusantara or generate 44.52% return on investment over 90 days.

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

Dharma Satya Nusantara  vs.  Austindo Nusantara Jaya

Dharma Satya Nusantara

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dharma Satya Nusantara are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Dharma Satya disclosed solid returns over the last few months and may actually be approaching a breakup point.

Austindo Nusantara Jaya

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dharma Satya and Austindo Nusantara

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

The idea behind Dharma Satya Nusantara and Austindo Nusantara Jaya 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.