Correlation Between Bank Negara and Argha Karya
Can any of the company-specific risk be diversified away by investing in both Bank Negara and Argha Karya 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 Negara and Argha Karya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Negara Indonesia and Argha Karya Prima, you can compare the effects of market volatilities on Bank Negara and Argha Karya 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 Negara with a short position of Argha Karya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Argha Karya.
Diversification Opportunities for Bank Negara and Argha Karya
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Argha is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Argha Karya Prima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argha Karya Prima and Bank Negara 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 Negara Indonesia are associated (or correlated) with Argha Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argha Karya Prima has no effect on the direction of Bank Negara i.e., Bank Negara and Argha Karya go up and down completely randomly.
Pair Corralation between Bank Negara and Argha Karya
Assuming the 90 days trading horizon Bank Negara Indonesia is expected to generate 2.09 times more return on investment than Argha Karya. However, Bank Negara is 2.09 times more volatile than Argha Karya Prima. It trades about 0.03 of its potential returns per unit of risk. Argha Karya Prima is currently generating about -0.05 per unit of risk. If you would invest 435,736 in Bank Negara Indonesia on August 31, 2024 and sell it today you would earn a total of 66,764 from holding Bank Negara Indonesia or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Argha Karya Prima
Performance |
| Timeline |
| Bank Negara Indonesia |
| Argha Karya Prima |
Bank Negara and Argha Karya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Argha Karya
The main advantage of trading using opposite Bank Negara and Argha Karya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara position performs unexpectedly, Argha Karya 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 Argha Karya will offset losses from the drop in Argha Karya's long position.| Bank Negara vs. Bank BRISyariah Tbk | Bank Negara vs. Ace Hardware Indonesia | Bank Negara vs. Merdeka Copper Gold | Bank Negara vs. Mitra Pinasthika Mustika |
| Argha Karya vs. Asiaplast Industries Tbk | Argha Karya vs. Alumindo Light Metal | Argha Karya vs. Berlina Tbk | Argha Karya vs. Anugerah Kagum Karya |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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