Yes, that is absolutely possible.
That collations are in the instance and mainly for the system databases => means that on an ideal base all your user databases have the same collation as your system databases.
Those database collations due not really rely on the system language.
So as you already wrote you have to install different instances on the same server if you have different collations. (technically it is possible to use different collation within one instance but it is not recommended)
Hope this helps.