Correlation Between PT Bank and Cult Food
Can any of the company-specific risk be diversified away by investing in both PT Bank and Cult Food 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 PT Bank and Cult Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Bank Rakyat and Cult Food Science, you can compare the effects of market volatilities on PT Bank and Cult Food 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 PT Bank with a short position of Cult Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Cult Food.
Diversification Opportunities for PT Bank and Cult Food
Poor diversification
The 3 months correlation between BKRKF and Cult is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Cult Food Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cult Food Science and PT Bank 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 PT Bank Rakyat are associated (or correlated) with Cult Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cult Food Science has no effect on the direction of PT Bank i.e., PT Bank and Cult Food go up and down completely randomly.
Pair Corralation between PT Bank and Cult Food
Assuming the 90 days horizon PT Bank is expected to generate 4.48 times less return on investment than Cult Food. But when comparing it to its historical volatility, PT Bank Rakyat is 1.73 times less risky than Cult Food. It trades about 0.01 of its potential returns per unit of risk. Cult Food Science is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5.03 in Cult Food Science on September 2, 2024 and sell it today you would lose (1.49) from holding Cult Food Science or give up 29.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.89% |
| Values | Daily Returns |
PT Bank Rakyat vs. Cult Food Science
Performance |
| Timeline |
| PT Bank Rakyat |
| Cult Food Science |
PT Bank and Cult Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and Cult Food
The main advantage of trading using opposite PT Bank and Cult Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, Cult Food 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 Cult Food will offset losses from the drop in Cult Food's long position.The idea behind PT Bank Rakyat and Cult Food Science 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.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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