Correlation Between Alfa Financial and PT Bank

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

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

Diversification Opportunities for Alfa Financial and PT Bank

-0.52

Correlation Coefficient

Alfa Financial  PT Bank

Excellent diversification

The 3 months correlation between Alfa and PQ9 is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri and Alfa Financial 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 Alfa Financial Software 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 Mandiri has no effect on the direction of Alfa Financial i.e., Alfa Financial and PT Bank go up and down completely randomly.

Pair Corralation between Alfa Financial and PT Bank

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 0.37 times more return on investment than PT Bank. However, Alfa Financial Software is 2.73 times less risky than PT Bank. It trades about -0.09 of its potential returns per unit of risk. PT Bank Mandiri is currently generating about -0.14 per unit of risk. If you would invest  260.00  in Alfa Financial Software on October 8, 2024 and sell it today you would lose (8.00) from holding Alfa Financial Software or give up 3.08% of portfolio value over 90 days.

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

Alfa Financial Software  vs.  PT Bank Mandiri

Alfa Financial Software

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Alfa Financial and PT Bank

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

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.