Correlation Between PT Bank and AeroVironment
Can any of the company-specific risk be diversified away by investing in both PT Bank and AeroVironment 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 AeroVironment 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 AeroVironment, you can compare the effects of market volatilities on PT Bank and AeroVironment 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 AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and AeroVironment.
Diversification Opportunities for PT Bank and AeroVironment
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BYRA and AeroVironment is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment 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 AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of PT Bank i.e., PT Bank and AeroVironment go up and down completely randomly.
Pair Corralation between PT Bank and AeroVironment
Assuming the 90 days trading horizon PT Bank Rakyat is expected to generate 1.37 times more return on investment than AeroVironment. However, PT Bank is 1.37 times more volatile than AeroVironment. It trades about -0.01 of its potential returns per unit of risk. AeroVironment is currently generating about -0.12 per unit of risk. If you would invest 25.00 in PT Bank Rakyat on August 27, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 4.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Bank Rakyat vs. AeroVironment
Performance |
| Timeline |
| PT Bank Rakyat |
| AeroVironment |
PT Bank and AeroVironment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bank and AeroVironment
The main advantage of trading using opposite PT Bank and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, AeroVironment 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 AeroVironment will offset losses from the drop in AeroVironment's long position.The idea behind PT Bank Rakyat and AeroVironment 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.| AeroVironment vs. Mobilezone Holding AG | AeroVironment vs. MTI WIRELESS EDGE | AeroVironment vs. MAVEN WIRELESS SWEDEN | AeroVironment vs. Entravision Communications |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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