Correlation Between Ford and PT Bank
Can any of the company-specific risk be diversified away by investing in both Ford and PT Bank 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 Ford and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and PT Bank Central, you can compare the effects of market volatilities on Ford and PT Bank 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 Ford with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and PT Bank.
Diversification Opportunities for Ford and PT Bank
Good diversification
The 3 months correlation between Ford and PBCRF is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and PT Bank Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Central and Ford 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 Ford Motor are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Central has no effect on the direction of Ford i.e., Ford and PT Bank go up and down completely randomly.
Pair Corralation between Ford and PT Bank
Taking into account the 90-day investment horizon Ford is expected to generate 1.69 times less return on investment than PT Bank. But when comparing it to its historical volatility, Ford Motor is 1.82 times less risky than PT Bank. It trades about 0.03 of its potential returns per unit of risk. PT Bank Central is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 56.00 in PT Bank Central on August 29, 2024 and sell it today you would earn a total of 4.00 from holding PT Bank Central or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.59% |
| Values | Daily Returns |
Ford Motor vs. PT Bank Central
Performance |
| Timeline |
| Ford Motor |
| PT Bank Central |
Ford and PT Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and PT Bank
The main advantage of trading using opposite Ford and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, PT Bank 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 PT Bank will offset losses from the drop in PT Bank's long position.The idea behind Ford Motor and PT Bank Central 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.| PT Bank vs. Commercial International Bank | PT Bank vs. Caixabank SA ADR | PT Bank vs. Bank Rakyat | PT Bank vs. Lloyds Banking Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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