Correlation Between Bank Central and PT Bank
Can any of the company-specific risk be diversified away by investing in both Bank Central 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 Bank Central and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Central Asia and PT Bank Rakyat, you can compare the effects of market volatilities on Bank Central 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 Bank Central with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and PT Bank.
Diversification Opportunities for Bank Central and PT Bank
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and BKRKF is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia 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 Bank Central 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 Central Asia 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 Bank Central i.e., Bank Central and PT Bank go up and down completely randomly.
Pair Corralation between Bank Central and PT Bank
Assuming the 90 days horizon Bank Central Asia is expected to generate 0.15 times more return on investment than PT Bank. However, Bank Central Asia is 6.47 times less risky than PT Bank. It trades about -0.28 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.05 per unit of risk. If you would invest 1,705 in Bank Central Asia on August 24, 2024 and sell it today you would lose (129.00) from holding Bank Central Asia or give up 7.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank Central Asia vs. PT Bank Rakyat
Performance |
| Timeline |
| Bank Central Asia |
| PT Bank Rakyat |
Bank Central and PT Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Central and PT Bank
The main advantage of trading using opposite Bank Central and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central 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.| Bank Central vs. Nedbank Group | Bank Central vs. Standard Bank Group | Bank Central vs. Kasikornbank Public Co | Bank Central vs. KBC Groep NV |
| PT Bank vs. Nedbank Group | PT Bank vs. Standard Bank Group | PT Bank vs. Bank Central Asia | PT Bank vs. PSB Holdings |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |