Correlation Between Duta Pertiwi and Kawasan Industri

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

By analyzing existing cross correlation between Duta Pertiwi Tbk and Kawasan Industri Jababeka, you can compare the effects of market volatilities on Duta Pertiwi and Kawasan Industri 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 Kawasan Industri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duta Pertiwi and Kawasan Industri.

Diversification Opportunities for Duta Pertiwi and Kawasan Industri

0.36

Correlation Coefficient

Duta Pertiwi  Kawasan Industri

Weak diversification

The 3 months correlation between Duta and Kawasan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Duta Pertiwi Tbk and Kawasan Industri Jababeka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasan Industri Jababeka 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 Tbk are associated (or correlated) with Kawasan Industri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasan Industri Jababeka has no effect on the direction of Duta Pertiwi i.e., Duta Pertiwi and Kawasan Industri go up and down completely randomly.

Pair Corralation between Duta Pertiwi and Kawasan Industri

Assuming the 90 days trading horizon Duta Pertiwi is expected to generate 7.22 times less return on investment than Kawasan Industri. In addition to that, Duta Pertiwi is 1.35 times more volatile than Kawasan Industri Jababeka. It trades about 0.02 of its total potential returns per unit of risk. Kawasan Industri Jababeka is currently generating about 0.23 per unit of volatility. If you would invest  15,300  in Kawasan Industri Jababeka on September 4, 2024 and sell it today you would earn a total of  4,300  from holding Kawasan Industri Jababeka or generate 28.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Duta Pertiwi Tbk  vs.  Kawasan Industri Jababeka

Duta Pertiwi Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duta Pertiwi Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Kawasan Industri Jababeka

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasan Industri Jababeka are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Kawasan Industri disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duta Pertiwi and Kawasan Industri

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

The idea behind Duta Pertiwi Tbk and Kawasan Industri Jababeka 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.