Correlation Between Arwana Citramulia and Bank Dinar

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

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

Diversification Opportunities for Arwana Citramulia and Bank Dinar

0.89

Correlation Coefficient

Arwana Citramulia  Bank Dinar

Very poor diversification

The 3 months correlation between Arwana and Bank is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Arwana Citramulia Tbk and Bank Dinar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Dinar Indonesia and Arwana Citramulia 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 Arwana Citramulia Tbk are associated (or correlated) with Bank Dinar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Dinar Indonesia has no effect on the direction of Arwana Citramulia i.e., Arwana Citramulia and Bank Dinar go up and down completely randomly.

Pair Corralation between Arwana Citramulia and Bank Dinar

Assuming the 90 days trading horizon Arwana Citramulia Tbk is expected to under-perform the Bank Dinar. But the stock apears to be less risky and, when comparing its historical volatility, Arwana Citramulia Tbk is 2.75 times less risky than Bank Dinar. The stock trades about -0.03 of its potential returns per unit of risk. The Bank Dinar Indonesia is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  16,800  in Bank Dinar Indonesia on September 27, 2024 and sell it today you would lose (5,900) from holding Bank Dinar Indonesia or give up 35.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Arwana Citramulia Tbk  vs.  Bank Dinar Indonesia

Arwana Citramulia Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arwana Citramulia Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Arwana Citramulia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bank Dinar Indonesia

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Arwana Citramulia and Bank Dinar

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

The idea behind Arwana Citramulia Tbk and Bank Dinar Indonesia 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.