Correlation Between Ace Hardware and Bank BRISyariah

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

By analyzing existing cross correlation between Ace Hardware Indonesia and Bank BRISyariah Tbk, you can compare the effects of market volatilities on Ace Hardware and Bank BRISyariah 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 Ace Hardware with a short position of Bank BRISyariah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ace Hardware and Bank BRISyariah.

Diversification Opportunities for Ace Hardware and Bank BRISyariah

0.76

Correlation Coefficient

Ace Hardware  Bank BRISyariah

Poor diversification

The 3 months correlation between Ace and Bank is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ace Hardware Indonesia and Bank BRISyariah Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank BRISyariah Tbk and Ace Hardware 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 Ace Hardware Indonesia are associated (or correlated) with Bank BRISyariah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank BRISyariah Tbk has no effect on the direction of Ace Hardware i.e., Ace Hardware and Bank BRISyariah go up and down completely randomly.

Pair Corralation between Ace Hardware and Bank BRISyariah

Assuming the 90 days trading horizon Ace Hardware is expected to generate 1.99 times less return on investment than Bank BRISyariah. In addition to that, Ace Hardware is 1.08 times more volatile than Bank BRISyariah Tbk. It trades about 0.04 of its total potential returns per unit of risk. Bank BRISyariah Tbk is currently generating about 0.08 per unit of volatility. If you would invest  167,079  in Bank BRISyariah Tbk on August 31, 2024 and sell it today you would earn a total of  122,921  from holding Bank BRISyariah Tbk or generate 73.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.72%
Values	Daily Returns

Ace Hardware Indonesia  vs.  Bank BRISyariah Tbk

Ace Hardware Indonesia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ace Hardware Indonesia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Ace Hardware may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Bank BRISyariah Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank BRISyariah Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank BRISyariah disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ace Hardware and Bank BRISyariah

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

The idea behind Ace Hardware Indonesia and Bank BRISyariah Tbk 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.