Correlation Between Indointernet Tbk and DCI Indonesia

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

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

Diversification Opportunities for Indointernet Tbk and DCI Indonesia

0.83

Correlation Coefficient

Indointernet Tbk  DCI Indonesia

Very poor diversification

The 3 months correlation between Indointernet and DCI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Indointernet Tbk PT and DCI Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCI Indonesia Tbk and Indointernet Tbk 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 Indointernet Tbk PT are associated (or correlated) with DCI Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCI Indonesia Tbk has no effect on the direction of Indointernet Tbk i.e., Indointernet Tbk and DCI Indonesia go up and down completely randomly.

Pair Corralation between Indointernet Tbk and DCI Indonesia

Assuming the 90 days trading horizon Indointernet Tbk PT is expected to under-perform the DCI Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Indointernet Tbk PT is 1.23 times less risky than DCI Indonesia. The stock trades about -0.14 of its potential returns per unit of risk. The DCI Indonesia Tbk is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  5,220,000  in DCI Indonesia Tbk on September 12, 2024 and sell it today you would lose (970,000) from holding DCI Indonesia Tbk or give up 18.58% of portfolio value over 90 days.

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

Indointernet Tbk PT  vs.  DCI Indonesia Tbk

Indointernet Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indointernet Tbk PT 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.

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.

Pair Trading with Indointernet Tbk and DCI Indonesia

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

The idea behind Indointernet Tbk PT and DCI 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.