Correlation Between Dharma Satya and Gudang Garam

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

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

Diversification Opportunities for Dharma Satya and Gudang Garam

-0.82

Correlation Coefficient

Dharma Satya  Gudang Garam

Pay attention - limited upside

The 3 months correlation between Dharma and Gudang is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dharma Satya Nusantara and Gudang Garam Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gudang Garam Tbk and Dharma Satya 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 Satya Nusantara are associated (or correlated) with Gudang Garam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gudang Garam Tbk has no effect on the direction of Dharma Satya i.e., Dharma Satya and Gudang Garam go up and down completely randomly.

Pair Corralation between Dharma Satya and Gudang Garam

Assuming the 90 days trading horizon Dharma Satya Nusantara is expected to generate 2.39 times more return on investment than Gudang Garam. However, Dharma Satya is 2.39 times more volatile than Gudang Garam Tbk. It trades about 0.16 of its potential returns per unit of risk. Gudang Garam Tbk is currently generating about -0.13 per unit of risk. If you would invest  84,000  in Dharma Satya Nusantara on September 12, 2024 and sell it today you would earn a total of  34,500  from holding Dharma Satya Nusantara or generate 41.07% return on investment over 90 days.

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

Dharma Satya Nusantara  vs.  Gudang Garam Tbk

Dharma Satya Nusantara

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dharma Satya Nusantara are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Dharma Satya disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gudang Garam Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gudang Garam Tbk 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dharma Satya and Gudang Garam

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

The idea behind Dharma Satya Nusantara and Gudang Garam 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.