Correlation Between Dana Brata and Kencana Energi

Can any of the company-specific risk be diversified away by investing in both Dana Brata and Kencana Energi 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 Dana Brata and Kencana Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dana Brata Luhur and Kencana Energi Lestari, you can compare the effects of market volatilities on Dana Brata and Kencana Energi 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 Dana Brata with a short position of Kencana Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana Brata and Kencana Energi.

Diversification Opportunities for Dana Brata and Kencana Energi

0.23

Correlation Coefficient

Dana Brata  Kencana Energi

Modest diversification

The 3 months correlation between Dana and Kencana is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dana Brata Luhur and Kencana Energi Lestari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kencana Energi Lestari and Dana Brata 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 Dana Brata Luhur are associated (or correlated) with Kencana Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kencana Energi Lestari has no effect on the direction of Dana Brata i.e., Dana Brata and Kencana Energi go up and down completely randomly.

Pair Corralation between Dana Brata and Kencana Energi

Assuming the 90 days trading horizon Dana Brata Luhur is expected to generate 0.79 times more return on investment than Kencana Energi. However, Dana Brata Luhur is 1.27 times less risky than Kencana Energi. It trades about -0.08 of its potential returns per unit of risk. Kencana Energi Lestari is currently generating about -0.17 per unit of risk. If you would invest  65,939  in Dana Brata Luhur on September 19, 2024 and sell it today you would lose (3,439) from holding Dana Brata Luhur or give up 5.22% of portfolio value over 90 days.

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

Dana Brata Luhur  vs.  Kencana Energi Lestari

Dana Brata Luhur

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dana Brata Luhur has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Dana Brata is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kencana Energi Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kencana Energi Lestari has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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 Dana Brata and Kencana Energi

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

The idea behind Dana Brata Luhur and Kencana Energi Lestari 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 Stocks Directory module to find actively traded stocks across global markets.