Correlation Between Bank Capital and Paninvest Tbk

Can any of the company-specific risk be diversified away by investing in both Bank Capital and Paninvest Tbk 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 Paninvest Tbk 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 Paninvest Tbk, you can compare the effects of market volatilities on Bank Capital and Paninvest Tbk 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 Paninvest Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Capital and Paninvest Tbk.

Diversification Opportunities for Bank Capital and Paninvest Tbk

0.38

Correlation Coefficient

Bank Capital  Paninvest Tbk

Weak diversification

The 3 months correlation between Bank and Paninvest is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bank Capital Indonesia and Paninvest Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paninvest Tbk 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 Paninvest Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paninvest Tbk has no effect on the direction of Bank Capital i.e., Bank Capital and Paninvest Tbk go up and down completely randomly.

Pair Corralation between Bank Capital and Paninvest Tbk

Assuming the 90 days trading horizon Bank Capital Indonesia is expected to generate 0.14 times more return on investment than Paninvest Tbk. However, Bank Capital Indonesia is 7.05 times less risky than Paninvest Tbk. It trades about 0.0 of its potential returns per unit of risk. Paninvest Tbk is currently generating about -0.01 per unit of risk. If you would invest  13,100  in Bank Capital Indonesia on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Bank Capital Indonesia or generate 0.0% return on investment over 90 days.

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

Bank Capital Indonesia  vs.  Paninvest Tbk

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.

Paninvest Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paninvest Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Paninvest Tbk 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 Paninvest Tbk

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

The idea behind Bank Capital Indonesia and Paninvest 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.