Correlation Between PT Dewi and PT Utama

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

By analyzing existing cross correlation between PT Dewi Shri and PT Utama Radar, you can compare the effects of market volatilities on PT Dewi and PT Utama 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 Dewi with a short position of PT Utama. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Dewi and PT Utama.

Diversification Opportunities for PT Dewi and PT Utama

0.5

Correlation Coefficient

PT Dewi  PT Utama

Very weak diversification

The 3 months correlation between DEWI and RCCC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding PT Dewi Shri and PT Utama Radar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Utama Radar and PT Dewi 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 Dewi Shri are associated (or correlated) with PT Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Utama Radar has no effect on the direction of PT Dewi i.e., PT Dewi and PT Utama go up and down completely randomly.

Pair Corralation between PT Dewi and PT Utama

Assuming the 90 days trading horizon PT Dewi is expected to generate 3.2 times less return on investment than PT Utama. But when comparing it to its historical volatility, PT Dewi Shri is 2.18 times less risky than PT Utama. It trades about 0.09 of its potential returns per unit of risk. PT Utama Radar is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  25,200  in PT Utama Radar on September 14, 2024 and sell it today you would earn a total of  8,800  from holding PT Utama Radar or generate 34.92% return on investment over 90 days.

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

PT Dewi Shri  vs.  PT Utama Radar

PT Dewi Shri

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Dewi Shri are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Dewi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PT Utama Radar

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Utama Radar are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Utama disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Dewi and PT Utama

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

The idea behind PT Dewi Shri and PT Utama Radar 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.