Correlation Between PT Bank and China Petroleum
Can any of the company-specific risk be diversified away by investing in both PT Bank and China 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 China 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 China Petroleum Chemical, you can compare the effects of market volatilities on PT Bank and China 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 China Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and China Petroleum.
Diversification Opportunities for PT Bank and China Petroleum
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between BKRKF and China is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical 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 China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of PT Bank i.e., PT Bank and China Petroleum go up and down completely randomly.
Pair Corralation between PT Bank and China Petroleum
Assuming the 90 days horizon PT Bank is expected to generate 74.03 times less return on investment than China Petroleum. But when comparing it to its historical volatility, PT Bank Rakyat is 3.05 times less risky than China Petroleum. It trades about 0.0 of its potential returns per unit of risk. China Petroleum Chemical is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 17.00 in China Petroleum Chemical on September 2, 2024 and sell it today you would earn a total of 33.00 from holding China Petroleum Chemical or generate 194.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 79.21% |
| Values | Daily Returns |
PT Bank Rakyat vs. China Petroleum Chemical
Performance |
| Timeline |
| PT Bank Rakyat |
| China Petroleum Chemical |
PT Bank and China Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and China Petroleum
The main advantage of trading using opposite PT Bank and China Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, China 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 China Petroleum will offset losses from the drop in China Petroleum's long position.The idea behind PT Bank Rakyat and China Petroleum Chemical 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.| China Petroleum vs. BP plc | China Petroleum vs. Shell PLC | China Petroleum vs. Origin Energy Ltd | China Petroleum vs. Equinor ASA |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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