Correlation Between PT Bank and Groove Botanicals
Can any of the company-specific risk be diversified away by investing in both PT Bank and Groove Botanicals 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 Groove Botanicals 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 Groove Botanicals, you can compare the effects of market volatilities on PT Bank and Groove Botanicals 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 Groove Botanicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Groove Botanicals.
Diversification Opportunities for PT Bank and Groove Botanicals
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BKRKF and Groove is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Groove Botanicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groove Botanicals 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 Groove Botanicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groove Botanicals has no effect on the direction of PT Bank i.e., PT Bank and Groove Botanicals go up and down completely randomly.
Pair Corralation between PT Bank and Groove Botanicals
Assuming the 90 days horizon PT Bank is expected to generate 14.1 times less return on investment than Groove Botanicals. But when comparing it to its historical volatility, PT Bank Rakyat is 3.97 times less risky than Groove Botanicals. It trades about 0.02 of its potential returns per unit of risk. Groove Botanicals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5.98 in Groove Botanicals on August 26, 2024 and sell it today you would lose (5.49) from holding Groove Botanicals or give up 91.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.89% |
| Values | Daily Returns |
PT Bank Rakyat vs. Groove Botanicals
Performance |
| Timeline |
| PT Bank Rakyat |
| Groove Botanicals |
PT Bank and Groove Botanicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and Groove Botanicals
The main advantage of trading using opposite PT Bank and Groove Botanicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, Groove Botanicals 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 Groove Botanicals will offset losses from the drop in Groove Botanicals' long position.The idea behind PT Bank Rakyat and Groove Botanicals 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.| Groove Botanicals vs. Embotelladora Andina SA | Groove Botanicals vs. Signet International Holdings | Groove Botanicals vs. National Beverage Corp | Groove Botanicals vs. PT Astra International |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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