Correlation Between Dharma Satya and Sumber Tani

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

Diversification Opportunities for Dharma Satya and Sumber Tani

0.43

Correlation Coefficient

Dharma Satya  Sumber Tani

Very weak diversification

The 3 months correlation between Dharma and Sumber is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dharma Satya Nusantara and Sumber Tani Agung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Tani Agung 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 Sumber Tani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Tani Agung has no effect on the direction of Dharma Satya i.e., Dharma Satya and Sumber Tani go up and down completely randomly.

Pair Corralation between Dharma Satya and Sumber Tani

Assuming the 90 days trading horizon Dharma Satya Nusantara is expected to under-perform the Sumber Tani. In addition to that, Dharma Satya is 1.64 times more volatile than Sumber Tani Agung. It trades about -0.22 of its total potential returns per unit of risk. Sumber Tani Agung is currently generating about -0.11 per unit of volatility. If you would invest  86,000  in Sumber Tani Agung on September 19, 2024 and sell it today you would lose (4,000) from holding Sumber Tani Agung or give up 4.65% of portfolio value over 90 days.

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

Dharma Satya Nusantara  vs.  Sumber Tani Agung

Dharma Satya Nusantara

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dharma Satya Nusantara are ranked lower than 7 (%) 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.

Sumber Tani Agung

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Tani Agung has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sumber Tani 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 Dharma Satya and Sumber Tani

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

The idea behind Dharma Satya Nusantara and Sumber Tani Agung 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.