Correlation Between Bank Mega and Bank Woori
Can any of the company-specific risk be diversified away by investing in both Bank Mega and Bank Woori 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 Bank Woori 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 Bank Woori Saudara, you can compare the effects of market volatilities on Bank Mega and Bank Woori 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 Bank Woori. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mega and Bank Woori.
Diversification Opportunities for Bank Mega and Bank Woori
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Bank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mega Tbk and Bank Woori Saudara in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Woori Saudara 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 Bank Woori. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Woori Saudara has no effect on the direction of Bank Mega i.e., Bank Mega and Bank Woori go up and down completely randomly.
Pair Corralation between Bank Mega and Bank Woori
Assuming the 90 days trading horizon Bank Mega Tbk is expected to generate 0.92 times more return on investment than Bank Woori. However, Bank Mega Tbk is 1.08 times less risky than Bank Woori. It trades about -0.14 of its potential returns per unit of risk. Bank Woori Saudara is currently generating about -0.32 per unit of risk. If you would invest 493,000 in Bank Mega Tbk on August 31, 2024 and sell it today you would lose (13,000) from holding Bank Mega Tbk or give up 2.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Mega Tbk vs. Bank Woori Saudara
Performance |
| Timeline |
| Bank Mega Tbk |
| Bank Woori Saudara |
Bank Mega and Bank Woori Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Mega and Bank Woori
The main advantage of trading using opposite Bank Mega and Bank Woori positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mega position performs unexpectedly, Bank Woori 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 Bank Woori will offset losses from the drop in Bank Woori'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 |
| Bank Woori vs. Bank Ocbc Nisp | Bank Woori vs. Bank Pan Indonesia | Bank Woori vs. Bank Mega Tbk | Bank Woori vs. Bank Mayapada Internasional |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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