Correlation Between Darma Henwa and Bayan Resources
Can any of the company-specific risk be diversified away by investing in both Darma Henwa and Bayan Resources 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 Darma Henwa and Bayan Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darma Henwa Tbk and Bayan Resources Tbk, you can compare the effects of market volatilities on Darma Henwa and Bayan Resources 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 Darma Henwa with a short position of Bayan Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darma Henwa and Bayan Resources.
Diversification Opportunities for Darma Henwa and Bayan Resources
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Darma and Bayan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Darma Henwa Tbk and Bayan Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayan Resources Tbk and Darma Henwa 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 Darma Henwa Tbk are associated (or correlated) with Bayan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayan Resources Tbk has no effect on the direction of Darma Henwa i.e., Darma Henwa and Bayan Resources go up and down completely randomly.
Pair Corralation between Darma Henwa and Bayan Resources
Assuming the 90 days trading horizon Darma Henwa Tbk is expected to generate 1.88 times more return on investment than Bayan Resources. However, Darma Henwa is 1.88 times more volatile than Bayan Resources Tbk. It trades about 0.08 of its potential returns per unit of risk. Bayan Resources Tbk is currently generating about 0.01 per unit of risk. If you would invest 5,000 in Darma Henwa Tbk on August 30, 2024 and sell it today you would earn a total of 6,400 from holding Darma Henwa Tbk or generate 128.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Darma Henwa Tbk vs. Bayan Resources Tbk
Performance |
| Timeline |
| Darma Henwa Tbk |
| Bayan Resources Tbk |
Darma Henwa and Bayan Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darma Henwa and Bayan Resources
The main advantage of trading using opposite Darma Henwa and Bayan Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darma Henwa position performs unexpectedly, Bayan Resources 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 Bayan Resources will offset losses from the drop in Bayan Resources' long position.| Darma Henwa vs. Barito Pacific Tbk | Darma Henwa vs. Charoen Pokphand Indonesia | Darma Henwa vs. Indocement Tunggal Prakarsa |
| Bayan Resources vs. Indo Tambangraya Megah | Bayan Resources vs. Indika Energy Tbk | Bayan Resources vs. Darma Henwa Tbk | Bayan Resources vs. Harum Energy Tbk |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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