Correlation Between PT Bank and Genuine Parts
Can any of the company-specific risk be diversified away by investing in both PT Bank and Genuine Parts 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 Genuine Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Bank Maybank and Genuine Parts, you can compare the effects of market volatilities on PT Bank and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Genuine Parts.
Diversification Opportunities for PT Bank and Genuine Parts
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BOZA and Genuine is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and Genuine Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Maybank are associated (or correlated) with Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of PT Bank i.e., PT Bank and Genuine Parts go up and down completely randomly.
Pair Corralation between PT Bank and Genuine Parts
Assuming the 90 days trading horizon PT Bank Maybank is expected to generate 2.49 times more return on investment than Genuine Parts. However, PT Bank is 2.49 times more volatile than Genuine Parts. It trades about 0.02 of its potential returns per unit of risk. Genuine Parts is currently generating about -0.02 per unit of risk. If you would invest 1.34 in PT Bank Maybank on September 3, 2024 and sell it today you would lose (0.04) from holding PT Bank Maybank or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Bank Maybank vs. Genuine Parts
Performance |
| Timeline |
| PT Bank Maybank |
| Genuine Parts |
PT Bank and Genuine Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and Genuine Parts
The main advantage of trading using opposite PT Bank and Genuine Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, Genuine Parts 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 Genuine Parts will offset losses from the drop in Genuine Parts' long position.| PT Bank vs. Iridium Communications | PT Bank vs. Gamma Communications plc | PT Bank vs. Ming Le Sports | PT Bank vs. Jacquet Metal Service |
| Genuine Parts vs. The Hanover Insurance | Genuine Parts vs. Check Point Software | Genuine Parts vs. MACOM Technology Solutions | Genuine Parts vs. PT Bank Maybank |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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