Correlation Between PT Bank and NAGOYA RAILROAD

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Can any of the company-specific risk be diversified away by investing in both PT Bank and NAGOYA RAILROAD 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 NAGOYA RAILROAD 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 NAGOYA RAILROAD, you can compare the effects of market volatilities on PT Bank and NAGOYA RAILROAD 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 NAGOYA RAILROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and NAGOYA RAILROAD.

Diversification Opportunities for PT Bank and NAGOYA RAILROAD

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between BYRA and NAGOYA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and NAGOYA RAILROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAGOYA RAILROAD 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 NAGOYA RAILROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAGOYA RAILROAD has no effect on the direction of PT Bank i.e., PT Bank and NAGOYA RAILROAD go up and down completely randomly.

Pair Corralation between PT Bank and NAGOYA RAILROAD

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the NAGOYA RAILROAD. In addition to that, PT Bank is 4.62 times more volatile than NAGOYA RAILROAD. It trades about -0.1 of its total potential returns per unit of risk. NAGOYA RAILROAD is currently generating about 0.04 per unit of volatility. If you would invest  1,040  in NAGOYA RAILROAD on October 10, 2024 and sell it today you would earn a total of  10.00  from holding NAGOYA RAILROAD or generate 0.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PT Bank Rakyat  vs.  NAGOYA RAILROAD

 Performance 
       Timeline  
PT Bank Rakyat 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
NAGOYA RAILROAD 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NAGOYA RAILROAD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NAGOYA RAILROAD is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Bank and NAGOYA RAILROAD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PT Bank and NAGOYA RAILROAD

The main advantage of trading using opposite PT Bank and NAGOYA RAILROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, NAGOYA RAILROAD 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 NAGOYA RAILROAD will offset losses from the drop in NAGOYA RAILROAD's long position.
The idea behind PT Bank Rakyat and NAGOYA RAILROAD 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.
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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