Correlation Between Bank Negara and Source Energy
Can any of the company-specific risk be diversified away by investing in both Bank Negara and Source 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 Source 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 Source Energy Services, you can compare the effects of market volatilities on Bank Negara and Source 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 Source Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Source Energy.
Diversification Opportunities for Bank Negara and Source Energy
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Source is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Source Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Energy Services 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 Source Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Energy Services has no effect on the direction of Bank Negara i.e., Bank Negara and Source Energy go up and down completely randomly.
Pair Corralation between Bank Negara and Source Energy
Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 2.4 times more return on investment than Source Energy. However, Bank Negara is 2.4 times more volatile than Source Energy Services. It trades about 0.05 of its potential returns per unit of risk. Source Energy Services is currently generating about 0.11 per unit of risk. If you would invest 1,428 in Bank Negara Indonesia on August 31, 2024 and sell it today you would earn a total of 117.00 from holding Bank Negara Indonesia or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Source Energy Services
Performance |
| Timeline |
| Bank Negara Indonesia |
| Source Energy Services |
Bank Negara and Source Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Source Energy
The main advantage of trading using opposite Bank Negara and Source Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara position performs unexpectedly, Source 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 Source Energy will offset losses from the drop in Source Energy's long position.| Bank Negara vs. Banco Bradesco SA | Bank Negara vs. Itau Unibanco Banco | Bank Negara vs. Lloyds Banking Group | Bank Negara vs. Deutsche Bank AG |
| Source Energy vs. Petroleo Brasileiro Petrobras | Source Energy vs. Equinor ASA ADR | Source Energy vs. Eni SpA ADR | Source Energy vs. YPF Sociedad Anonima |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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