Correlation Between Dharma Polimetal and Cisarua Mountain

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

By analyzing existing cross correlation between Dharma Polimetal Tbk and Cisarua Mountain Dairy, you can compare the effects of market volatilities on Dharma Polimetal and Cisarua Mountain 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 Dharma Polimetal with a short position of Cisarua Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dharma Polimetal and Cisarua Mountain.

Diversification Opportunities for Dharma Polimetal and Cisarua Mountain

-0.16

Correlation Coefficient

Dharma Polimetal  Cisarua Mountain

Good diversification

The 3 months correlation between Dharma and Cisarua is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dharma Polimetal Tbk and Cisarua Mountain Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisarua Mountain Dairy and Dharma Polimetal 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 Dharma Polimetal Tbk are associated (or correlated) with Cisarua Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisarua Mountain Dairy has no effect on the direction of Dharma Polimetal i.e., Dharma Polimetal and Cisarua Mountain go up and down completely randomly.

Pair Corralation between Dharma Polimetal and Cisarua Mountain

Assuming the 90 days trading horizon Dharma Polimetal Tbk is expected to generate 0.6 times more return on investment than Cisarua Mountain. However, Dharma Polimetal Tbk is 1.67 times less risky than Cisarua Mountain. It trades about 0.03 of its potential returns per unit of risk. Cisarua Mountain Dairy is currently generating about -0.05 per unit of risk. If you would invest  92,000  in Dharma Polimetal Tbk on December 31, 2024 and sell it today you would earn a total of  2,000  from holding Dharma Polimetal Tbk or generate 2.17% return on investment over 90 days.

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

Dharma Polimetal Tbk  vs.  Cisarua Mountain Dairy

Dharma Polimetal Tbk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dharma Polimetal Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Dharma Polimetal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cisarua Mountain Dairy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cisarua Mountain Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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.

Pair Trading with Dharma Polimetal and Cisarua Mountain

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

The idea behind Dharma Polimetal Tbk and Cisarua Mountain Dairy 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.