Correlation Between Bank Rakyat and Mitra Keluarga
Can any of the company-specific risk be diversified away by investing in both Bank Rakyat and Mitra Keluarga 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 Rakyat and Mitra Keluarga into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Rakyat Indonesia and Mitra Keluarga Karyasehat, you can compare the effects of market volatilities on Bank Rakyat and Mitra Keluarga 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 Rakyat with a short position of Mitra Keluarga. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and Mitra Keluarga.
Diversification Opportunities for Bank Rakyat and Mitra Keluarga
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Mitra is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Mitra Keluarga Karyasehat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitra Keluarga Karyasehat and Bank Rakyat 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 Rakyat Indonesia are associated (or correlated) with Mitra Keluarga. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitra Keluarga Karyasehat has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Mitra Keluarga go up and down completely randomly.
Pair Corralation between Bank Rakyat and Mitra Keluarga
Assuming the 90 days trading horizon Bank Rakyat Indonesia is expected to under-perform the Mitra Keluarga. But the stock apears to be less risky and, when comparing its historical volatility, Bank Rakyat Indonesia is 1.56 times less risky than Mitra Keluarga. The stock trades about -0.49 of its potential returns per unit of risk. The Mitra Keluarga Karyasehat is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest 290,000 in Mitra Keluarga Karyasehat on August 24, 2024 and sell it today you would lose (28,000) from holding Mitra Keluarga Karyasehat or give up 9.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Rakyat Indonesia vs. Mitra Keluarga Karyasehat
Performance |
| Timeline |
| Bank Rakyat Indonesia |
| Mitra Keluarga Karyasehat |
Bank Rakyat and Mitra Keluarga Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Rakyat and Mitra Keluarga
The main advantage of trading using opposite Bank Rakyat and Mitra Keluarga positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, Mitra Keluarga 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 Mitra Keluarga will offset losses from the drop in Mitra Keluarga's long position.The idea behind Bank Rakyat Indonesia and Mitra Keluarga Karyasehat 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.| Mitra Keluarga vs. Matahari Department Store | Mitra Keluarga vs. Surya Citra Media | Mitra Keluarga vs. Sawit Sumbermas Sarana | Mitra Keluarga vs. Lippo Karawaci 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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