Correlation Between Bank Central and Cisadane Sawit

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

By analyzing existing cross correlation between Bank Central Asia and Cisadane Sawit Raya, you can compare the effects of market volatilities on Bank Central and Cisadane Sawit 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 Central with a short position of Cisadane Sawit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Cisadane Sawit.

Diversification Opportunities for Bank Central and Cisadane Sawit

-0.55

Correlation Coefficient

Bank Central  Cisadane Sawit

Excellent diversification

The 3 months correlation between Bank and Cisadane is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Cisadane Sawit Raya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisadane Sawit Raya and Bank Central 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 Central Asia are associated (or correlated) with Cisadane Sawit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisadane Sawit Raya has no effect on the direction of Bank Central i.e., Bank Central and Cisadane Sawit go up and down completely randomly.

Pair Corralation between Bank Central and Cisadane Sawit

Assuming the 90 days trading horizon Bank Central Asia is expected to under-perform the Cisadane Sawit. But the stock apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.16 times less risky than Cisadane Sawit. The stock trades about -0.04 of its potential returns per unit of risk. The Cisadane Sawit Raya is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  61,000  in Cisadane Sawit Raya on October 7, 2024 and sell it today you would earn a total of  11,000  from holding Cisadane Sawit Raya or generate 18.03% return on investment over 90 days.

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

Bank Central Asia  vs.  Cisadane Sawit Raya

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cisadane Sawit Raya

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisadane Sawit Raya are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cisadane Sawit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Central and Cisadane Sawit

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

The idea behind Bank Central Asia and Cisadane Sawit Raya 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.