Correlation Between FKS Food and Bank Negara
Can any of the company-specific risk be diversified away by investing in both FKS Food and Bank Negara 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 FKS Food and Bank Negara into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FKS Food Sejahtera and Bank Negara Indonesia, you can compare the effects of market volatilities on FKS Food and Bank Negara 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 FKS Food with a short position of Bank Negara. Check out your portfolio center. Please also check ongoing floating volatility patterns of FKS Food and Bank Negara.
Diversification Opportunities for FKS Food and Bank Negara
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FKS and Bank is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding FKS Food Sejahtera and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia and FKS Food 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 FKS Food Sejahtera are associated (or correlated) with Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of FKS Food i.e., FKS Food and Bank Negara go up and down completely randomly.
Pair Corralation between FKS Food and Bank Negara
Assuming the 90 days trading horizon FKS Food Sejahtera is expected to under-perform the Bank Negara. But the stock apears to be less risky and, when comparing its historical volatility, FKS Food Sejahtera is 1.73 times less risky than Bank Negara. The stock trades about -0.45 of its potential returns per unit of risk. The Bank Negara Indonesia is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 530,000 in Bank Negara Indonesia on September 3, 2024 and sell it today you would lose (32,000) from holding Bank Negara Indonesia or give up 6.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FKS Food Sejahtera vs. Bank Negara Indonesia
Performance |
| Timeline |
| FKS Food Sejahtera |
| Bank Negara Indonesia |
FKS Food and Bank Negara Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FKS Food and Bank Negara
The main advantage of trading using opposite FKS Food and Bank Negara positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FKS Food position performs unexpectedly, Bank Negara 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 Bank Negara will offset losses from the drop in Bank Negara's long position.| FKS Food vs. Astra International Tbk | FKS Food vs. Unilever Indonesia Tbk | FKS Food vs. Telkom Indonesia Tbk | FKS Food vs. Bank Mandiri Persero |
| Bank Negara vs. Paninvest Tbk | Bank Negara vs. Mitra Pinasthika Mustika | Bank Negara vs. Jakarta Int Hotels | Bank Negara vs. Asuransi Harta Aman |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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