Correlation Between Bakrieland Development and Darma Henwa

Can any of the company-specific risk be diversified away by investing in both Bakrieland Development and Darma Henwa 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 Bakrieland Development and Darma Henwa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bakrieland Development Tbk and Darma Henwa Tbk, you can compare the effects of market volatilities on Bakrieland Development and Darma Henwa 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 Bakrieland Development with a short position of Darma Henwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrieland Development and Darma Henwa.

Diversification Opportunities for Bakrieland Development and Darma Henwa

0.17

Correlation Coefficient

Bakrieland Development  Darma Henwa

Average diversification

The 3 months correlation between Bakrieland and Darma is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bakrieland Development Tbk and Darma Henwa Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darma Henwa Tbk and Bakrieland Development 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 Bakrieland Development Tbk are associated (or correlated) with Darma Henwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darma Henwa Tbk has no effect on the direction of Bakrieland Development i.e., Bakrieland Development and Darma Henwa go up and down completely randomly.

Pair Corralation between Bakrieland Development and Darma Henwa

Assuming the 90 days trading horizon Bakrieland Development Tbk is expected to under-perform the Darma Henwa. In addition to that, Bakrieland Development is 1.33 times more volatile than Darma Henwa Tbk. It trades about -0.05 of its total potential returns per unit of risk. Darma Henwa Tbk is currently generating about 0.08 per unit of volatility. If you would invest  5,600  in Darma Henwa Tbk on September 13, 2024 and sell it today you would earn a total of  6,600  from holding Darma Henwa Tbk or generate 117.86% return on investment over 90 days.

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

Bakrieland Development Tbk  vs.  Darma Henwa Tbk

Bakrieland Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bakrieland Development Tbk 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.

Darma Henwa Tbk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Darma Henwa Tbk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Darma Henwa disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bakrieland Development and Darma Henwa

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

The idea behind Bakrieland Development Tbk and Darma Henwa 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.