Correlation Between PT Indo and Bank of Nova Scotia

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

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

Diversification Opportunities for PT Indo and Bank of Nova Scotia

0.9

Correlation Coefficient

PT Indo  Bank of Nova Scotia

Almost no diversification

The 3 months correlation between 3IB and Bank is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding PT Indo Tambangraya and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nova Scotia and PT Indo 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 PT Indo Tambangraya are associated (or correlated) with Bank of Nova Scotia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nova Scotia has no effect on the direction of PT Indo i.e., PT Indo and Bank of Nova Scotia go up and down completely randomly.

Pair Corralation between PT Indo and Bank of Nova Scotia

Assuming the 90 days trading horizon PT Indo Tambangraya is expected to under-perform the Bank of Nova Scotia. In addition to that, PT Indo is 2.26 times more volatile than The Bank of. It trades about -0.12 of its total potential returns per unit of risk. The Bank of is currently generating about -0.18 per unit of volatility. If you would invest  5,028  in The Bank of on December 20, 2024 and sell it today you would lose (606.00) from holding The Bank of or give up 12.05% of portfolio value over 90 days.

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

PT Indo Tambangraya  vs.  The Bank of

PT Indo Tambangraya

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indo Tambangraya has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bank of Nova Scotia

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PT Indo and Bank of Nova Scotia

The main advantage of trading using opposite PT Indo and Bank of Nova Scotia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indo position performs unexpectedly, Bank of Nova Scotia 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 Bank of Nova Scotia will offset losses from the drop in Bank of Nova Scotia's long position.

The idea behind PT Indo Tambangraya and The Bank of 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.