Correlation Between Pan Brothers and Dharma Satya

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

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

Diversification Opportunities for Pan Brothers and Dharma Satya

0.66

Correlation Coefficient

Pan Brothers  Dharma Satya

Poor diversification

The 3 months correlation between Pan and Dharma is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pan Brothers Tbk and Dharma Satya Nusantara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dharma Satya Nusantara and Pan Brothers 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 Pan Brothers Tbk are associated (or correlated) with Dharma Satya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dharma Satya Nusantara has no effect on the direction of Pan Brothers i.e., Pan Brothers and Dharma Satya go up and down completely randomly.

Pair Corralation between Pan Brothers and Dharma Satya

Assuming the 90 days trading horizon Pan Brothers is expected to generate 2.04 times less return on investment than Dharma Satya. But when comparing it to its historical volatility, Pan Brothers Tbk is 1.39 times less risky than Dharma Satya. It trades about 0.09 of its potential returns per unit of risk. Dharma Satya Nusantara is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  84,500  in Dharma Satya Nusantara on September 5, 2024 and sell it today you would earn a total of  28,500  from holding Dharma Satya Nusantara or generate 33.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Pan Brothers Tbk  vs.  Dharma Satya Nusantara

Pan Brothers Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Brothers Tbk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pan Brothers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Dharma Satya Nusantara

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dharma Satya Nusantara are ranked lower than 10 (%) 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.

Pair Trading with Pan Brothers and Dharma Satya

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

The idea behind Pan Brothers Tbk and Dharma Satya Nusantara 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.