Correlation Between Global Ship and PT Bank

Can any of the company-specific risk be diversified away by investing in both Global Ship 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 Global Ship and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Ship Lease and PT Bank Rakyat, you can compare the effects of market volatilities on Global Ship 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 Global Ship with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and PT Bank.

Diversification Opportunities for Global Ship and PT Bank

0.52

Correlation Coefficient

Global Ship  PT Bank

Very weak diversification

The 3 months correlation between Global and BYRA is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease 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 Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and PT Bank go up and down completely randomly.

Pair Corralation between Global Ship and PT Bank

Assuming the 90 days horizon Global Ship Lease is expected to generate 0.41 times more return on investment than PT Bank. However, Global Ship Lease is 2.43 times less risky than PT Bank. It trades about 0.08 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.11 per unit of risk. If you would invest  2,042  in Global Ship Lease on October 22, 2024 and sell it today you would earn a total of  48.00  from holding Global Ship Lease or generate 2.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Global Ship Lease  vs.  PT Bank Rakyat

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Global Ship and PT Bank

The main advantage of trading using opposite Global Ship and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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.

The idea behind Global Ship Lease and PT Bank Rakyat 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.