Correlation Between Bank Negara and Pabrik Kertas
Can any of the company-specific risk be diversified away by investing in both Bank Negara and Pabrik Kertas 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 Pabrik Kertas 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 Pabrik Kertas Tjiwi, you can compare the effects of market volatilities on Bank Negara and Pabrik Kertas 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 Pabrik Kertas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Pabrik Kertas.
Diversification Opportunities for Bank Negara and Pabrik Kertas
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Pabrik is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Pabrik Kertas Tjiwi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pabrik Kertas Tjiwi 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 Pabrik Kertas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pabrik Kertas Tjiwi has no effect on the direction of Bank Negara i.e., Bank Negara and Pabrik Kertas go up and down completely randomly.
Pair Corralation between Bank Negara and Pabrik Kertas
Assuming the 90 days trading horizon Bank Negara Indonesia is expected to generate 0.73 times more return on investment than Pabrik Kertas. However, Bank Negara Indonesia is 1.38 times less risky than Pabrik Kertas. It trades about -0.09 of its potential returns per unit of risk. Pabrik Kertas Tjiwi is currently generating about -0.21 per unit of risk. If you would invest 522,500 in Bank Negara Indonesia on August 31, 2024 and sell it today you would lose (20,000) from holding Bank Negara Indonesia or give up 3.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Pabrik Kertas Tjiwi
Performance |
| Timeline |
| Bank Negara Indonesia |
| Pabrik Kertas Tjiwi |
Bank Negara and Pabrik Kertas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Pabrik Kertas
The main advantage of trading using opposite Bank Negara and Pabrik Kertas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara position performs unexpectedly, Pabrik Kertas 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 Pabrik Kertas will offset losses from the drop in Pabrik Kertas' 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 |
| Pabrik Kertas vs. Indah Kiat Pulp | Pabrik Kertas vs. Indocement Tunggal Prakarsa | Pabrik Kertas vs. Barito Pacific Tbk | Pabrik Kertas vs. Charoen Pokphand Indonesia |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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