Correlation Between Bank Mega and Indonesia Fibreboard
Can any of the company-specific risk be diversified away by investing in both Bank Mega and Indonesia Fibreboard 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 Bank Mega and Indonesia Fibreboard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Mega Tbk and Indonesia Fibreboard Industry, you can compare the effects of market volatilities on Bank Mega and Indonesia Fibreboard 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 Bank Mega with a short position of Indonesia Fibreboard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mega and Indonesia Fibreboard.
Diversification Opportunities for Bank Mega and Indonesia Fibreboard
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Indonesia is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mega Tbk and Indonesia Fibreboard Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesia Fibreboard and Bank Mega 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 Bank Mega Tbk are associated (or correlated) with Indonesia Fibreboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesia Fibreboard has no effect on the direction of Bank Mega i.e., Bank Mega and Indonesia Fibreboard go up and down completely randomly.
Pair Corralation between Bank Mega and Indonesia Fibreboard
Assuming the 90 days trading horizon Bank Mega Tbk is expected to under-perform the Indonesia Fibreboard. But the stock apears to be less risky and, when comparing its historical volatility, Bank Mega Tbk is 1.76 times less risky than Indonesia Fibreboard. The stock trades about -0.01 of its potential returns per unit of risk. The Indonesia Fibreboard Industry is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 13,867 in Indonesia Fibreboard Industry on September 3, 2024 and sell it today you would earn a total of 5,733 from holding Indonesia Fibreboard Industry or generate 41.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Mega Tbk vs. Indonesia Fibreboard Industry
Performance |
| Timeline |
| Bank Mega Tbk |
| Indonesia Fibreboard |
Bank Mega and Indonesia Fibreboard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Mega and Indonesia Fibreboard
The main advantage of trading using opposite Bank Mega and Indonesia Fibreboard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mega position performs unexpectedly, Indonesia Fibreboard 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 Indonesia Fibreboard will offset losses from the drop in Indonesia Fibreboard's long position.| Bank Mega vs. Bank Ocbc Nisp | Bank Mega vs. Bank Mayapada Internasional | Bank Mega vs. Bank Permata Tbk | Bank Mega vs. Bank Pan Indonesia |
| Indonesia Fibreboard vs. Gunung Raja Paksi | Indonesia Fibreboard vs. Satyamitra Kemas Lestari | Indonesia Fibreboard vs. Ifishdeco PT | Indonesia Fibreboard vs. Saraswanti Anugerah Makmur |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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