Correlation Between Bank Capital and Bk Harda

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

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

Diversification Opportunities for Bank Capital and Bk Harda

0.03

Correlation Coefficient

Bank Capital  Bk Harda

Significant diversification

The 3 months correlation between Bank and BBHI is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank Capital Indonesia and Bk Harda Internasional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bk Harda Internasional and Bank Capital 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 Bank Capital Indonesia are associated (or correlated) with Bk Harda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bk Harda Internasional has no effect on the direction of Bank Capital i.e., Bank Capital and Bk Harda go up and down completely randomly.

Pair Corralation between Bank Capital and Bk Harda

Assuming the 90 days trading horizon Bank Capital is expected to generate 120.86 times less return on investment than Bk Harda. But when comparing it to its historical volatility, Bank Capital Indonesia is 15.06 times less risky than Bk Harda. It trades about 0.0 of its potential returns per unit of risk. Bk Harda Internasional is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  70,000  in Bk Harda Internasional on December 29, 2024 and sell it today you would lose (3,000) from holding Bk Harda Internasional or give up 4.29% of portfolio value over 90 days.

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

Bank Capital Indonesia  vs.  Bk Harda Internasional

Bank Capital Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Capital Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Capital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bk Harda Internasional

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bk Harda Internasional are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bk Harda is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Capital and Bk Harda

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

The idea behind Bank Capital Indonesia and Bk Harda Internasional 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.