Correlation Between Bank Central and Harum Energy
Can any of the company-specific risk be diversified away by investing in both Bank Central and Harum Energy 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 Harum Energy 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 Harum Energy Tbk, you can compare the effects of market volatilities on Bank Central and Harum Energy 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 Harum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Harum Energy.
Diversification Opportunities for Bank Central and Harum Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Harum is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Harum Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harum Energy 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 Harum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harum Energy Tbk has no effect on the direction of Bank Central i.e., Bank Central and Harum Energy go up and down completely randomly.
Pair Corralation between Bank Central and Harum Energy
Assuming the 90 days trading horizon Bank Central Asia is expected to generate 0.71 times more return on investment than Harum Energy. However, Bank Central Asia is 1.41 times less risky than Harum Energy. It trades about -0.09 of its potential returns per unit of risk. Harum Energy Tbk is currently generating about -0.24 per unit of risk. If you would invest 1,059,715 in Bank Central Asia on August 28, 2024 and sell it today you would lose (59,715) from holding Bank Central Asia or give up 5.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Central Asia vs. Harum Energy Tbk
Performance |
| Timeline |
| Bank Central Asia |
| Harum Energy Tbk |
Bank Central and Harum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Central and Harum Energy
The main advantage of trading using opposite Bank Central and Harum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central position performs unexpectedly, Harum Energy 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 Harum Energy will offset losses from the drop in Harum Energy's long position.| Bank Central vs. Bank Rakyat Indonesia | Bank Central vs. Bank Mandiri Persero | Bank Central vs. Bank Negara Indonesia | Bank Central vs. Astra International Tbk |
| Harum Energy vs. Indo Tambangraya Megah | Harum Energy vs. Indika Energy Tbk | Harum Energy vs. Adaro Energy Tbk | Harum Energy vs. Akr Corporindo 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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