Correlation Between Delta Djakarta and Ultra Jaya

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

By analyzing existing cross correlation between Delta Djakarta Tbk and Ultra Jaya Milk, you can compare the effects of market volatilities on Delta Djakarta and Ultra Jaya 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 Delta Djakarta with a short position of Ultra Jaya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Djakarta and Ultra Jaya.

Diversification Opportunities for Delta Djakarta and Ultra Jaya

0.86

Correlation Coefficient

Delta Djakarta  Ultra Jaya

Very poor diversification

The 3 months correlation between Delta and Ultra is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Delta Djakarta Tbk and Ultra Jaya Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Jaya Milk and Delta Djakarta 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 Delta Djakarta Tbk are associated (or correlated) with Ultra Jaya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Jaya Milk has no effect on the direction of Delta Djakarta i.e., Delta Djakarta and Ultra Jaya go up and down completely randomly.

Pair Corralation between Delta Djakarta and Ultra Jaya

Assuming the 90 days trading horizon Delta Djakarta Tbk is expected to under-perform the Ultra Jaya. But the stock apears to be less risky and, when comparing its historical volatility, Delta Djakarta Tbk is 1.18 times less risky than Ultra Jaya. The stock trades about -0.13 of its potential returns per unit of risk. The Ultra Jaya Milk is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  181,500  in Ultra Jaya Milk on September 3, 2024 and sell it today you would lose (2,500) from holding Ultra Jaya Milk or give up 1.38% of portfolio value over 90 days.

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

Delta Djakarta Tbk  vs.  Ultra Jaya Milk

Delta Djakarta Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delta Djakarta Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Ultra Jaya Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Jaya Milk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Ultra Jaya 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 Delta Djakarta and Ultra Jaya

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

The idea behind Delta Djakarta Tbk and Ultra Jaya Milk 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.