Correlation Between Dharma Satya and Sekar Bumi

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Can any of the company-specific risk be diversified away by investing in both Dharma Satya and Sekar Bumi 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 Sekar Bumi 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 Sekar Bumi Tbk, you can compare the effects of market volatilities on Dharma Satya and Sekar Bumi 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 Sekar Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dharma Satya and Sekar Bumi.

Diversification Opportunities for Dharma Satya and Sekar Bumi

DharmaSekarDiversified AwayDharmaSekarDiversified Away100%
0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Dharma and Sekar is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dharma Satya Nusantara and Sekar Bumi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekar Bumi Tbk 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 Sekar Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekar Bumi Tbk has no effect on the direction of Dharma Satya i.e., Dharma Satya and Sekar Bumi go up and down completely randomly.

Pair Corralation between Dharma Satya and Sekar Bumi

Assuming the 90 days trading horizon Dharma Satya is expected to generate 1.85 times less return on investment than Sekar Bumi. But when comparing it to its historical volatility, Dharma Satya Nusantara is 1.66 times less risky than Sekar Bumi. It trades about 0.12 of its potential returns per unit of risk. Sekar Bumi Tbk is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  30,800  in Sekar Bumi Tbk on September 17, 2024 and sell it today you would earn a total of  16,600  from holding Sekar Bumi Tbk or generate 53.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dharma Satya Nusantara  vs.  Sekar Bumi Tbk

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0204060
JavaScript chart by amCharts 3.21.15DSNG SKBM
       Timeline  
Dharma Satya Nusantara 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dharma Satya Nusantara are ranked lower than 9 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec8009001,0001,1001,2001,3001,400
Sekar Bumi Tbk 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sekar Bumi Tbk are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sekar Bumi disclosed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec300350400450500550600

Dharma Satya and Sekar Bumi Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.8-9.58-6.37-3.160.05353.356.7610.1713.58 0.0100.0150.020
JavaScript chart by amCharts 3.21.15DSNG SKBM
       Returns  

Pair Trading with Dharma Satya and Sekar Bumi

The main advantage of trading using opposite Dharma Satya and Sekar Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dharma Satya position performs unexpectedly, Sekar Bumi 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 Sekar Bumi will offset losses from the drop in Sekar Bumi's long position.
The idea behind Dharma Satya Nusantara and Sekar Bumi 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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