Correlation Between Lucid and PT Bank
Can any of the company-specific risk be diversified away by investing in both Lucid 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 Lucid and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucid Group and PT Bank Rakyat, you can compare the effects of market volatilities on Lucid 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 Lucid with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid and PT Bank.
Diversification Opportunities for Lucid and PT Bank
Poor diversification
The 3 months correlation between Lucid and BKRKF is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lucid Group and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and Lucid 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 Lucid Group 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 Rakyat has no effect on the direction of Lucid i.e., Lucid and PT Bank go up and down completely randomly.
Pair Corralation between Lucid and PT Bank
Given the investment horizon of 90 days Lucid Group is expected to under-perform the PT Bank. But the stock apears to be less risky and, when comparing its historical volatility, Lucid Group is 1.18 times less risky than PT Bank. The stock trades about -0.03 of its potential returns per unit of risk. The PT Bank Rakyat is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 32.00 in PT Bank Rakyat on August 26, 2024 and sell it today you would lose (5.00) from holding PT Bank Rakyat or give up 15.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.74% |
| Values | Daily Returns |
Lucid Group vs. PT Bank Rakyat
Performance |
| Timeline |
| Lucid Group |
| PT Bank Rakyat |
Lucid and PT Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucid and PT Bank
The main advantage of trading using opposite Lucid and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid Group and PT Bank Rakyat 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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