Correlation Between Bank Central and PAM Mineral

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

Diversification Opportunities for Bank Central and PAM Mineral

0.15

Correlation Coefficient

Bank Central  PAM Mineral

Average diversification

The 3 months correlation between Bank and PAM is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and PAM Mineral Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAM Mineral Tbk 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 PAM Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAM Mineral Tbk has no effect on the direction of Bank Central i.e., Bank Central and PAM Mineral go up and down completely randomly.

Pair Corralation between Bank Central and PAM Mineral

Assuming the 90 days trading horizon Bank Central Asia is expected to under-perform the PAM Mineral. But the stock apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.41 times less risky than PAM Mineral. The stock trades about -0.12 of its potential returns per unit of risk. The PAM Mineral Tbk is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  29,069  in PAM Mineral Tbk on December 2, 2024 and sell it today you would lose (3,069) from holding PAM Mineral Tbk or give up 10.56% of portfolio value over 90 days.

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

Bank Central Asia  vs.  PAM Mineral Tbk

Bank Central Asia

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PAM Mineral Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days PAM Mineral Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bank Central and PAM Mineral

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

The idea behind Bank Central Asia and PAM Mineral 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.