Correlation Between Bank Ocbc and Indonesian Tobacco
Can any of the company-specific risk be diversified away by investing in both Bank Ocbc and Indonesian Tobacco 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 Ocbc and Indonesian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Ocbc Nisp and Indonesian Tobacco Tbk, you can compare the effects of market volatilities on Bank Ocbc and Indonesian Tobacco 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 Ocbc with a short position of Indonesian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Ocbc and Indonesian Tobacco.
Diversification Opportunities for Bank Ocbc and Indonesian Tobacco
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Indonesian is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank Ocbc Nisp and Indonesian Tobacco Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Tobacco Tbk and Bank Ocbc 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 Ocbc Nisp are associated (or correlated) with Indonesian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Tobacco Tbk has no effect on the direction of Bank Ocbc i.e., Bank Ocbc and Indonesian Tobacco go up and down completely randomly.
Pair Corralation between Bank Ocbc and Indonesian Tobacco
Assuming the 90 days trading horizon Bank Ocbc Nisp is expected to under-perform the Indonesian Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, Bank Ocbc Nisp is 1.97 times less risky than Indonesian Tobacco. The stock trades about -0.06 of its potential returns per unit of risk. The Indonesian Tobacco Tbk is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 27,200 in Indonesian Tobacco Tbk on August 26, 2024 and sell it today you would lose (400.00) from holding Indonesian Tobacco Tbk or give up 1.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Ocbc Nisp vs. Indonesian Tobacco Tbk
Performance |
| Timeline |
| Bank Ocbc Nisp |
| Indonesian Tobacco Tbk |
Bank Ocbc and Indonesian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Ocbc and Indonesian Tobacco
The main advantage of trading using opposite Bank Ocbc and Indonesian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Ocbc position performs unexpectedly, Indonesian Tobacco 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 Indonesian Tobacco will offset losses from the drop in Indonesian Tobacco's long position.| Bank Ocbc vs. Bank Mega Tbk | Bank Ocbc vs. Bank Pan Indonesia | Bank Ocbc vs. Bank Permata Tbk | Bank Ocbc vs. Bank Cimb Niaga |
| Indonesian Tobacco vs. Transcoal Pacific Tbk | Indonesian Tobacco vs. Garudafood Putra Putri | Indonesian Tobacco vs. Provident Agro Tbk | Indonesian Tobacco vs. Bhuwanatala Indah Permai |
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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