Correlation Between Bank Negara and Calima Energy
Can any of the company-specific risk be diversified away by investing in both Bank Negara and Calima Energy 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 Negara and Calima Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Negara Indonesia and Calima Energy Limited, you can compare the effects of market volatilities on Bank Negara and Calima Energy 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 Negara with a short position of Calima Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Calima Energy.
Diversification Opportunities for Bank Negara and Calima Energy
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Calima is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Calima Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calima Energy Limited and Bank Negara 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 Negara Indonesia are associated (or correlated) with Calima Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calima Energy Limited has no effect on the direction of Bank Negara i.e., Bank Negara and Calima Energy go up and down completely randomly.
Pair Corralation between Bank Negara and Calima Energy
Assuming the 90 days horizon Bank Negara is expected to generate 12.42 times less return on investment than Calima Energy. But when comparing it to its historical volatility, Bank Negara Indonesia is 8.49 times less risky than Calima Energy. It trades about 0.04 of its potential returns per unit of risk. Calima Energy Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5.09 in Calima Energy Limited on August 28, 2024 and sell it today you would lose (3.84) from holding Calima Energy Limited or give up 75.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Calima Energy Limited
Performance |
| Timeline |
| Bank Negara Indonesia |
| Calima Energy Limited |
Bank Negara and Calima Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Calima Energy
The main advantage of trading using opposite Bank Negara and Calima Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara position performs unexpectedly, Calima Energy 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 Calima Energy will offset losses from the drop in Calima Energy's long position.The idea behind Bank Negara Indonesia and Calima Energy Limited 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.| Calima Energy vs. Buru Energy Limited | Calima Energy vs. Altura Energy | Calima Energy vs. Daybreak Oil and | Calima Energy vs. Arrow Exploration Corp |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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