Correlation Between PT Indo and Dermapharm Holding

Can any of the company-specific risk be diversified away by investing in both PT Indo and Dermapharm Holding 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 PT Indo and Dermapharm Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Indo Tambangraya and Dermapharm Holding SE, you can compare the effects of market volatilities on PT Indo and Dermapharm Holding 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 PT Indo with a short position of Dermapharm Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indo and Dermapharm Holding.

Diversification Opportunities for PT Indo and Dermapharm Holding

0.79

Correlation Coefficient

PT Indo  Dermapharm Holding

Poor diversification

The 3 months correlation between 3IB and Dermapharm is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding PT Indo Tambangraya and Dermapharm Holding SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dermapharm Holding and PT Indo 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 PT Indo Tambangraya are associated (or correlated) with Dermapharm Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dermapharm Holding has no effect on the direction of PT Indo i.e., PT Indo and Dermapharm Holding go up and down completely randomly.

Pair Corralation between PT Indo and Dermapharm Holding

Assuming the 90 days trading horizon PT Indo is expected to generate 4.07 times less return on investment than Dermapharm Holding. In addition to that, PT Indo is 1.32 times more volatile than Dermapharm Holding SE. It trades about 0.01 of its total potential returns per unit of risk. Dermapharm Holding SE is currently generating about 0.07 per unit of volatility. If you would invest  3,500  in Dermapharm Holding SE on September 27, 2024 and sell it today you would earn a total of  280.00  from holding Dermapharm Holding SE or generate 8.0% return on investment over 90 days.

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

PT Indo Tambangraya  vs.  Dermapharm Holding SE

PT Indo Tambangraya

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indo Tambangraya are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PT Indo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dermapharm Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dermapharm Holding SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dermapharm Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Indo and Dermapharm Holding

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

The idea behind PT Indo Tambangraya and Dermapharm Holding SE 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..