Correlation Between Bakrie Sumatera and Darma Henwa

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

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

Diversification Opportunities for Bakrie Sumatera and Darma Henwa

-0.05

Correlation Coefficient

Bakrie Sumatera  Darma Henwa

Good diversification

The 3 months correlation between Bakrie and Darma is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations 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 Bakrie Sumatera 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 Bakrie Sumatera Plantations 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 Bakrie Sumatera i.e., Bakrie Sumatera and Darma Henwa go up and down completely randomly.

Pair Corralation between Bakrie Sumatera and Darma Henwa

Assuming the 90 days trading horizon Bakrie Sumatera Plantations is expected to under-perform the Darma Henwa. But the stock apears to be less risky and, when comparing its historical volatility, Bakrie Sumatera Plantations is 1.1 times less risky than Darma Henwa. The stock trades about -0.03 of its potential returns per unit of risk. The Darma Henwa Tbk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  10,700  in Darma Henwa Tbk on December 24, 2024 and sell it today you would lose (400.00) from holding Darma Henwa Tbk or give up 3.74% of portfolio value over 90 days.

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

Bakrie Sumatera Plantations  vs.  Darma Henwa Tbk

Bakrie Sumatera Plan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakrie Sumatera Plantations 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

Very Weak

Over the last 90 days Darma Henwa Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Darma Henwa 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 Bakrie Sumatera and Darma Henwa

The main advantage of trading using opposite Bakrie Sumatera and Darma Henwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bakrie Sumatera 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 Bakrie Sumatera Plantations 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.