Correlation Between DONGJIANG ENVIRONMENTAL and PT Hexindo

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

By analyzing existing cross correlation between DONGJIANG ENVIRONMENTAL H and PT Hexindo Adiperkasa, you can compare the effects of market volatilities on DONGJIANG ENVIRONMENTAL and PT Hexindo 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 DONGJIANG ENVIRONMENTAL with a short position of PT Hexindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of DONGJIANG ENVIRONMENTAL and PT Hexindo.

Diversification Opportunities for DONGJIANG ENVIRONMENTAL and PT Hexindo

-0.21

Correlation Coefficient

DONGJIANG ENVIRONMENTAL  PT Hexindo

Very good diversification

The 3 months correlation between DONGJIANG and HX1A is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding DONGJIANG ENVIRONMENTAL H and PT Hexindo Adiperkasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Hexindo Adiperkasa and DONGJIANG ENVIRONMENTAL 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 DONGJIANG ENVIRONMENTAL H are associated (or correlated) with PT Hexindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Hexindo Adiperkasa has no effect on the direction of DONGJIANG ENVIRONMENTAL i.e., DONGJIANG ENVIRONMENTAL and PT Hexindo go up and down completely randomly.

Pair Corralation between DONGJIANG ENVIRONMENTAL and PT Hexindo

Assuming the 90 days horizon DONGJIANG ENVIRONMENTAL H is expected to generate 1.32 times more return on investment than PT Hexindo. However, DONGJIANG ENVIRONMENTAL is 1.32 times more volatile than PT Hexindo Adiperkasa. It trades about 0.01 of its potential returns per unit of risk. PT Hexindo Adiperkasa is currently generating about 0.01 per unit of risk. If you would invest  27.00  in DONGJIANG ENVIRONMENTAL H on October 11, 2024 and sell it today you would lose (7.00) from holding DONGJIANG ENVIRONMENTAL H or give up 25.93% of portfolio value over 90 days.

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

DONGJIANG ENVIRONMENTAL H  vs.  PT Hexindo Adiperkasa

DONGJIANG ENVIRONMENTAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DONGJIANG ENVIRONMENTAL H has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DONGJIANG ENVIRONMENTAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Hexindo Adiperkasa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Hexindo Adiperkasa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with DONGJIANG ENVIRONMENTAL and PT Hexindo

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

The idea behind DONGJIANG ENVIRONMENTAL H and PT Hexindo Adiperkasa 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.