Correlation Between Duta Pertiwi and Colorpak Indonesia

Can any of the company-specific risk be diversified away by investing in both Duta Pertiwi and Colorpak Indonesia 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 Colorpak Indonesia 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 Colorpak Indonesia Tbk, you can compare the effects of market volatilities on Duta Pertiwi and Colorpak Indonesia 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 Colorpak Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duta Pertiwi and Colorpak Indonesia.

Diversification Opportunities for Duta Pertiwi and Colorpak Indonesia

0.2

Correlation Coefficient

Duta Pertiwi  Colorpak Indonesia

Modest diversification

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

Pair Corralation between Duta Pertiwi and Colorpak Indonesia

Assuming the 90 days trading horizon Duta Pertiwi Nusantara is expected to under-perform the Colorpak Indonesia. In addition to that, Duta Pertiwi is 3.03 times more volatile than Colorpak Indonesia Tbk. It trades about -0.22 of its total potential returns per unit of risk. Colorpak Indonesia Tbk is currently generating about -0.01 per unit of volatility. If you would invest  106,000  in Colorpak Indonesia Tbk on December 30, 2024 and sell it today you would lose (1,000.00) from holding Colorpak Indonesia Tbk or give up 0.94% of portfolio value over 90 days.

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

Duta Pertiwi Nusantara  vs.  Colorpak Indonesia Tbk

Duta Pertiwi Nusantara

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Colorpak Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colorpak Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Colorpak Indonesia 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 Colorpak Indonesia

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

The idea behind Duta Pertiwi Nusantara and Colorpak Indonesia Tbk 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.