Correlation Between PT Bank and International Petroleum
Can any of the company-specific risk be diversified away by investing in both PT Bank and International Petroleum 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 International Petroleum 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 International Petroleum, you can compare the effects of market volatilities on PT Bank and International Petroleum 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 International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and International Petroleum.
Diversification Opportunities for PT Bank and International Petroleum
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BKRKF and International is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum 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 International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of PT Bank i.e., PT Bank and International Petroleum go up and down completely randomly.
Pair Corralation between PT Bank and International Petroleum
Assuming the 90 days horizon PT Bank Rakyat is expected to under-perform the International Petroleum. In addition to that, PT Bank is 2.8 times more volatile than International Petroleum. It trades about -0.08 of its total potential returns per unit of risk. International Petroleum is currently generating about -0.04 per unit of volatility. If you would invest 1,150 in International Petroleum on September 3, 2024 and sell it today you would lose (25.00) from holding International Petroleum or give up 2.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Bank Rakyat vs. International Petroleum
Performance |
| Timeline |
| PT Bank Rakyat |
| International Petroleum |
PT Bank and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and International Petroleum
The main advantage of trading using opposite PT Bank and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.| PT Bank vs. Bank Mandiri Persero | PT Bank vs. Piraeus Bank SA | PT Bank vs. Eurobank Ergasias Services | PT Bank vs. Kasikornbank Public Co |
| International Petroleum vs. 1st NRG Corp | International Petroleum vs. Otto Energy Limited | International Petroleum vs. Razor Energy Corp | International Petroleum vs. Prospera Energy |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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