Correlation Between Bank Central and Asuransi Ramayana

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Can any of the company-specific risk be diversified away by investing in both Bank Central and Asuransi Ramayana 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 Bank Central and Asuransi Ramayana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Central Asia and Asuransi Ramayana Tbk, you can compare the effects of market volatilities on Bank Central and Asuransi Ramayana 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 Bank Central with a short position of Asuransi Ramayana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Asuransi Ramayana.

Diversification Opportunities for Bank Central and Asuransi Ramayana

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bank and Asuransi is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Asuransi Ramayana Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asuransi Ramayana Tbk and Bank Central 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 Bank Central Asia are associated (or correlated) with Asuransi Ramayana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asuransi Ramayana Tbk has no effect on the direction of Bank Central i.e., Bank Central and Asuransi Ramayana go up and down completely randomly.

Pair Corralation between Bank Central and Asuransi Ramayana

Assuming the 90 days trading horizon Bank Central Asia is expected to generate 1.86 times more return on investment than Asuransi Ramayana. However, Bank Central is 1.86 times more volatile than Asuransi Ramayana Tbk. It trades about -0.05 of its potential returns per unit of risk. Asuransi Ramayana Tbk is currently generating about -0.23 per unit of risk. If you would invest  915,000  in Bank Central Asia on November 27, 2024 and sell it today you would lose (22,500) from holding Bank Central Asia or give up 2.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bank Central Asia  vs.  Asuransi Ramayana Tbk

 Performance 
       Timeline  
Bank Central Asia 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Bank Central Asia 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.
Asuransi Ramayana Tbk 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Asuransi Ramayana Tbk 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.

Bank Central and Asuransi Ramayana Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank Central and Asuransi Ramayana

The main advantage of trading using opposite Bank Central and Asuransi Ramayana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Asuransi Ramayana 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 Asuransi Ramayana will offset losses from the drop in Asuransi Ramayana's long position.
The idea behind Bank Central Asia and Asuransi Ramayana 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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