Correlation Between Bank Negara and Sumber Alfaria

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

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

Diversification Opportunities for Bank Negara and Sumber Alfaria

-0.14

Correlation Coefficient

Bank Negara  Sumber Alfaria

Good diversification

The 3 months correlation between Bank and Sumber is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Sumber Alfaria Trijaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Alfaria Trijaya and Bank Negara 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 Negara Indonesia are associated (or correlated) with Sumber Alfaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Alfaria Trijaya has no effect on the direction of Bank Negara i.e., Bank Negara and Sumber Alfaria go up and down completely randomly.

Pair Corralation between Bank Negara and Sumber Alfaria

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the Sumber Alfaria. In addition to that, Bank Negara is 1.04 times more volatile than Sumber Alfaria Trijaya. It trades about -0.1 of its total potential returns per unit of risk. Sumber Alfaria Trijaya is currently generating about -0.1 per unit of volatility. If you would invest  287,000  in Sumber Alfaria Trijaya on November 28, 2024 and sell it today you would lose (45,000) from holding Sumber Alfaria Trijaya or give up 15.68% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  Sumber Alfaria Trijaya

Bank Negara Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Negara Indonesia 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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Sumber Alfaria Trijaya

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sumber Alfaria Trijaya 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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bank Negara and Sumber Alfaria

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

The idea behind Bank Negara Indonesia and Sumber Alfaria Trijaya 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.