Correlation Between Dharma Satya and RMK Energy

Can any of the company-specific risk be diversified away by investing in both Dharma Satya and RMK Energy 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 RMK Energy 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 RMK Energy PT, you can compare the effects of market volatilities on Dharma Satya and RMK Energy 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 RMK Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dharma Satya and RMK Energy.

Diversification Opportunities for Dharma Satya and RMK Energy

0.01

Correlation Coefficient

Dharma Satya  RMK Energy

Significant diversification

The 3 months correlation between Dharma and RMK is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dharma Satya Nusantara and RMK Energy PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMK Energy PT 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 RMK Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMK Energy PT has no effect on the direction of Dharma Satya i.e., Dharma Satya and RMK Energy go up and down completely randomly.

Pair Corralation between Dharma Satya and RMK Energy

Assuming the 90 days trading horizon Dharma Satya Nusantara is expected to under-perform the RMK Energy. In addition to that, Dharma Satya is 2.15 times more volatile than RMK Energy PT. It trades about -0.11 of its total potential returns per unit of risk. RMK Energy PT is currently generating about 0.07 per unit of volatility. If you would invest  50,500  in RMK Energy PT on December 21, 2024 and sell it today you would earn a total of  2,500  from holding RMK Energy PT or generate 4.95% return on investment over 90 days.

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

Dharma Satya Nusantara  vs.  RMK Energy PT

Dharma Satya Nusantara

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dharma Satya 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.

RMK Energy PT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RMK Energy PT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, RMK Energy 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 Dharma Satya and RMK Energy

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

The idea behind Dharma Satya Nusantara and RMK Energy PT 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.