Correlation Between Red Planet and Damai Sejahtera

Can any of the company-specific risk be diversified away by investing in both Red Planet and Damai Sejahtera 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 Red Planet and Damai Sejahtera into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Red Planet Indonesia and Damai Sejahtera Abadi, you can compare the effects of market volatilities on Red Planet and Damai Sejahtera 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 Red Planet with a short position of Damai Sejahtera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Planet and Damai Sejahtera.

Diversification Opportunities for Red Planet and Damai Sejahtera

-0.48

Correlation Coefficient

Red Planet  Damai Sejahtera

Very good diversification

The 3 months correlation between Red and Damai is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Red Planet Indonesia and Damai Sejahtera Abadi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Damai Sejahtera Abadi and Red Planet 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 Red Planet Indonesia are associated (or correlated) with Damai Sejahtera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Damai Sejahtera Abadi has no effect on the direction of Red Planet i.e., Red Planet and Damai Sejahtera go up and down completely randomly.

Pair Corralation between Red Planet and Damai Sejahtera

Assuming the 90 days trading horizon Red Planet Indonesia is expected to generate 1.41 times more return on investment than Damai Sejahtera. However, Red Planet is 1.41 times more volatile than Damai Sejahtera Abadi. It trades about 0.05 of its potential returns per unit of risk. Damai Sejahtera Abadi is currently generating about -0.05 per unit of risk. If you would invest  3,200  in Red Planet Indonesia on December 26, 2024 and sell it today you would earn a total of  300.00  from holding Red Planet Indonesia or generate 9.38% return on investment over 90 days.

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

Red Planet Indonesia  vs.  Damai Sejahtera Abadi

Red Planet Indonesia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Planet Indonesia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Red Planet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Damai Sejahtera Abadi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Damai Sejahtera Abadi 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 Red Planet and Damai Sejahtera

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

The idea behind Red Planet Indonesia and Damai Sejahtera Abadi 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.