Correlation Between Bank Net and DCI Indonesia

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

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

Diversification Opportunities for Bank Net and DCI Indonesia

-0.01

Correlation Coefficient

Bank Net  DCI Indonesia

Good diversification

The 3 months correlation between Bank and DCI is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bank Net Indonesia 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 Bank Net 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 Bank Net Indonesia 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 Bank Net i.e., Bank Net and DCI Indonesia go up and down completely randomly.

Pair Corralation between Bank Net and DCI Indonesia

Assuming the 90 days trading horizon Bank Net is expected to generate 3.24 times less return on investment than DCI Indonesia. But when comparing it to its historical volatility, Bank Net Indonesia is 2.11 times less risky than DCI Indonesia. It trades about 0.05 of its potential returns per unit of risk. DCI Indonesia Tbk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,090,000  in DCI Indonesia Tbk on September 14, 2024 and sell it today you would earn a total of  160,000  from holding DCI Indonesia Tbk or generate 3.91% return on investment over 90 days.

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

Bank Net Indonesia  vs.  DCI Indonesia Tbk

Bank Net Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Bank Net and DCI Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Net 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 Bank Net Indonesia 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.