Correlation Between Darma Henwa and Benakat Petroleum

Can any of the company-specific risk be diversified away by investing in both Darma Henwa and Benakat Petroleum 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 Darma Henwa and Benakat Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Darma Henwa Tbk and Benakat Petroleum Energy, you can compare the effects of market volatilities on Darma Henwa and Benakat Petroleum 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 Darma Henwa with a short position of Benakat Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darma Henwa and Benakat Petroleum.

Diversification Opportunities for Darma Henwa and Benakat Petroleum

0.72

Correlation Coefficient

Darma Henwa  Benakat Petroleum

Poor diversification

The 3 months correlation between Darma and Benakat is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Darma Henwa Tbk and Benakat Petroleum Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benakat Petroleum Energy and Darma Henwa 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 Darma Henwa Tbk are associated (or correlated) with Benakat Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benakat Petroleum Energy has no effect on the direction of Darma Henwa i.e., Darma Henwa and Benakat Petroleum go up and down completely randomly.

Pair Corralation between Darma Henwa and Benakat Petroleum

Assuming the 90 days trading horizon Darma Henwa Tbk is expected to generate 0.78 times more return on investment than Benakat Petroleum. However, Darma Henwa Tbk is 1.29 times less risky than Benakat Petroleum. It trades about 0.1 of its potential returns per unit of risk. Benakat Petroleum Energy is currently generating about 0.01 per unit of risk. If you would invest  6,100  in Darma Henwa Tbk on September 13, 2024 and sell it today you would earn a total of  6,100  from holding Darma Henwa Tbk or generate 100.0% return on investment over 90 days.

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

Darma Henwa Tbk  vs.  Benakat Petroleum Energy

Darma Henwa Tbk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Darma Henwa Tbk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Darma Henwa disclosed solid returns over the last few months and may actually be approaching a breakup point.

Benakat Petroleum Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Benakat Petroleum Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Benakat Petroleum disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Darma Henwa and Benakat Petroleum

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

The idea behind Darma Henwa Tbk and Benakat Petroleum Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.