Correlation Between Dharma Satya and Unilever Indonesia

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

Diversification Opportunities for Dharma Satya and Unilever Indonesia

-0.63

Correlation Coefficient

Dharma Satya  Unilever Indonesia

Excellent diversification

The 3 months correlation between Dharma and Unilever is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dharma Satya Nusantara and Unilever Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Indonesia 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 Unilever Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever Indonesia Tbk has no effect on the direction of Dharma Satya i.e., Dharma Satya and Unilever Indonesia go up and down completely randomly.

Pair Corralation between Dharma Satya and Unilever Indonesia

Assuming the 90 days trading horizon Dharma Satya Nusantara is expected to generate 1.62 times more return on investment than Unilever Indonesia. However, Dharma Satya is 1.62 times more volatile than Unilever Indonesia Tbk. It trades about 0.12 of its potential returns per unit of risk. Unilever Indonesia Tbk is currently generating about -0.07 per unit of risk. If you would invest  82,500  in Dharma Satya Nusantara on September 15, 2024 and sell it today you would earn a total of  23,500  from holding Dharma Satya Nusantara or generate 28.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Dharma Satya Nusantara  vs.  Unilever Indonesia Tbk

Dharma Satya Nusantara

Risk-Adjusted Performance

9 of 100

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 weak forward-looking signals, Dharma Satya disclosed solid returns over the last few months and may actually be approaching a breakup point.

Unilever Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Dharma Satya and Unilever Indonesia

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

The idea behind Dharma Satya Nusantara and Unilever Indonesia 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 Global Correlations module to find global opportunities by holding instruments from different markets.