Correlation Between Duta Pertiwi and Budi Starch

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

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

Diversification Opportunities for Duta Pertiwi and Budi Starch

0.2

Correlation Coefficient

Duta Pertiwi  Budi Starch

Modest diversification

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

Pair Corralation between Duta Pertiwi and Budi Starch

Assuming the 90 days trading horizon Duta Pertiwi Nusantara is expected to under-perform the Budi Starch. But the stock apears to be less risky and, when comparing its historical volatility, Duta Pertiwi Nusantara is 1.15 times less risky than Budi Starch. The stock trades about -0.06 of its potential returns per unit of risk. The Budi Starch Sweetener is currently generating about -0.01 of returns per unit of risk over similar time horizon. 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

Duta Pertiwi Nusantara  vs.  Budi Starch Sweetener

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.

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.

Pair Trading with Duta Pertiwi and Budi Starch

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

The idea behind Duta Pertiwi Nusantara and Budi Starch Sweetener 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..