Correlation Between BFI Finance and Bank Permata
Can any of the company-specific risk be diversified away by investing in both BFI Finance and Bank Permata 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 BFI Finance and Bank Permata into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BFI Finance Indonesia and Bank Permata Tbk, you can compare the effects of market volatilities on BFI Finance and Bank Permata 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 BFI Finance with a short position of Bank Permata. Check out your portfolio center. Please also check ongoing floating volatility patterns of BFI Finance and Bank Permata.
Diversification Opportunities for BFI Finance and Bank Permata
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BFI and Bank is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding BFI Finance Indonesia and Bank Permata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Permata Tbk and BFI Finance 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 BFI Finance Indonesia are associated (or correlated) with Bank Permata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Permata Tbk has no effect on the direction of BFI Finance i.e., BFI Finance and Bank Permata go up and down completely randomly.
Pair Corralation between BFI Finance and Bank Permata
Assuming the 90 days trading horizon BFI Finance Indonesia is expected to generate 1.24 times more return on investment than Bank Permata. However, BFI Finance is 1.24 times more volatile than Bank Permata Tbk. It trades about -0.08 of its potential returns per unit of risk. Bank Permata Tbk is currently generating about -0.3 per unit of risk. If you would invest 99,000 in BFI Finance Indonesia on August 31, 2024 and sell it today you would lose (6,000) from holding BFI Finance Indonesia or give up 6.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BFI Finance Indonesia vs. Bank Permata Tbk
Performance |
| Timeline |
| BFI Finance Indonesia |
| Bank Permata Tbk |
BFI Finance and Bank Permata Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BFI Finance and Bank Permata
The main advantage of trading using opposite BFI Finance and Bank Permata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BFI Finance position performs unexpectedly, Bank Permata 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 Bank Permata will offset losses from the drop in Bank Permata's long position.| BFI Finance vs. Adira Dinamika Multi | BFI Finance vs. Bank Permata Tbk | BFI Finance vs. Bank Bukopin Tbk |
| Bank Permata vs. Bank Cimb Niaga | Bank Permata vs. Bank Maybank Indonesia | Bank Permata vs. Bank Danamon Indonesia | Bank Permata vs. Bank Pan 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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