Correlation Between Ultra Jaya and Dharma Satya

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

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

Diversification Opportunities for Ultra Jaya and Dharma Satya

-0.53

Correlation Coefficient

Ultra Jaya  Dharma Satya

Excellent diversification

The 3 months correlation between Ultra and Dharma is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Jaya Milk and Dharma Satya Nusantara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dharma Satya Nusantara and Ultra Jaya 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 Ultra Jaya Milk are associated (or correlated) with Dharma Satya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dharma Satya Nusantara has no effect on the direction of Ultra Jaya i.e., Ultra Jaya and Dharma Satya go up and down completely randomly.

Pair Corralation between Ultra Jaya and Dharma Satya

Assuming the 90 days trading horizon Ultra Jaya Milk is expected to generate 0.59 times more return on investment than Dharma Satya. However, Ultra Jaya Milk is 1.69 times less risky than Dharma Satya. It trades about -0.01 of its potential returns per unit of risk. Dharma Satya Nusantara is currently generating about -0.27 per unit of risk. If you would invest  166,500  in Ultra Jaya Milk on September 27, 2024 and sell it today you would lose (1,500) from holding Ultra Jaya Milk or give up 0.9% of portfolio value over 90 days.

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

Ultra Jaya Milk  vs.  Dharma Satya Nusantara

Ultra Jaya Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Jaya Milk 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.

Dharma Satya Nusantara

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dharma Satya Nusantara are ranked lower than 4 (%) 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.

Pair Trading with Ultra Jaya and Dharma Satya

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

The idea behind Ultra Jaya Milk and Dharma Satya Nusantara 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.