Correlation Between PT Bank and Deere
Can any of the company-specific risk be diversified away by investing in both PT Bank and Deere 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 Deere 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 Deere Company, you can compare the effects of market volatilities on PT Bank and Deere 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 Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Deere.
Diversification Opportunities for PT Bank and Deere
Excellent diversification
The 3 months correlation between BYRA and Deere is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company 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 Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of PT Bank i.e., PT Bank and Deere go up and down completely randomly.
Pair Corralation between PT Bank and Deere
Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the Deere. But the stock apears to be less risky and, when comparing its historical volatility, PT Bank Rakyat is 1.06 times less risky than Deere. The stock trades about -0.2 of its potential returns per unit of risk. The Deere Company is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 37,335 in Deere Company on September 1, 2024 and sell it today you would earn a total of 6,745 from holding Deere Company or generate 18.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
PT Bank Rakyat vs. Deere Company
Performance |
| Timeline |
| PT Bank Rakyat |
| Deere Company |
PT Bank and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and Deere
The main advantage of trading using opposite PT Bank and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, Deere 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 Deere will offset losses from the drop in Deere's long position.The idea behind PT Bank Rakyat and Deere Company 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.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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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