Correlation Between Vale Indonesia and Darma Henwa
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia 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 Vale Indonesia and Darma Henwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale Indonesia Tbk and Darma Henwa Tbk, you can compare the effects of market volatilities on Vale Indonesia 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 Vale Indonesia with a short position of Darma Henwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Darma Henwa.
Diversification Opportunities for Vale Indonesia and Darma Henwa
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vale and Darma is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia 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 Vale Indonesia 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 Vale Indonesia 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 Vale Indonesia i.e., Vale Indonesia and Darma Henwa go up and down completely randomly.
Pair Corralation between Vale Indonesia and Darma Henwa
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Darma Henwa. But the stock apears to be less risky and, when comparing its historical volatility, Vale Indonesia Tbk is 4.47 times less risky than Darma Henwa. The stock trades about -0.2 of its potential returns per unit of risk. The Darma Henwa Tbk is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9,400 in Darma Henwa Tbk on August 31, 2024 and sell it today you would earn a total of 1,100 from holding Darma Henwa Tbk or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale Indonesia Tbk vs. Darma Henwa Tbk
Performance |
| Timeline |
| Vale Indonesia Tbk |
| Darma Henwa Tbk |
Vale Indonesia and Darma Henwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale Indonesia and Darma Henwa
The main advantage of trading using opposite Vale Indonesia and Darma Henwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia 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.| Vale Indonesia vs. Timah Persero Tbk | Vale Indonesia vs. Aneka Tambang Persero | Vale Indonesia vs. Bukit Asam Tbk | Vale Indonesia vs. Perusahaan Gas Negara |
| Darma Henwa vs. Perusahaan Gas Negara | Darma Henwa vs. Vale Indonesia Tbk | Darma Henwa vs. Telkom Indonesia Tbk | Darma Henwa vs. Mitra Pinasthika Mustika |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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