Correlation Between Budi Starch and Duta Pertiwi

Can any of the company-specific risk be diversified away by investing in both Budi Starch and Duta Pertiwi 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 Budi Starch and Duta Pertiwi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Budi Starch Sweetener and Duta Pertiwi Nusantara, you can compare the effects of market volatilities on Budi Starch and Duta Pertiwi 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 Budi Starch with a short position of Duta Pertiwi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Budi Starch and Duta Pertiwi.

Diversification Opportunities for Budi Starch and Duta Pertiwi

0.2

Correlation Coefficient

Budi Starch  Duta Pertiwi

Modest diversification

The 3 months correlation between Budi and Duta is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Budi Starch Sweetener and Duta Pertiwi Nusantara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duta Pertiwi Nusantara and Budi Starch 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 Budi Starch Sweetener are associated (or correlated) with Duta Pertiwi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duta Pertiwi Nusantara has no effect on the direction of Budi Starch i.e., Budi Starch and Duta Pertiwi go up and down completely randomly.

Pair Corralation between Budi Starch and Duta Pertiwi

Assuming the 90 days trading horizon Budi Starch Sweetener is expected to generate 1.15 times more return on investment than Duta Pertiwi. However, Budi Starch is 1.15 times more volatile than Duta Pertiwi Nusantara. It trades about -0.01 of its potential returns per unit of risk. Duta Pertiwi Nusantara is currently generating about -0.06 per unit of risk. If you would invest  22,896  in Budi Starch Sweetener on September 14, 2024 and sell it today you would lose (296.00) from holding Budi Starch Sweetener or give up 1.29% of portfolio value over 90 days.

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

Budi Starch Sweetener  vs.  Duta Pertiwi Nusantara

Budi Starch Sweetener

Risk-Adjusted Performance

0 of 100

Very Weak

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

Duta Pertiwi Nusantara

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Budi Starch and Duta Pertiwi

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

The idea behind Budi Starch Sweetener and Duta Pertiwi 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.