Correlation Between Bank Negara and Bukit Uluwatu

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

Diversification Opportunities for Bank Negara and Bukit Uluwatu

-0.16

Correlation Coefficient

Bank Negara  Bukit Uluwatu

Good diversification

The 3 months correlation between Bank and Bukit is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Bukit Uluwatu Villa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bukit Uluwatu Villa 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 Bukit Uluwatu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bukit Uluwatu Villa has no effect on the direction of Bank Negara i.e., Bank Negara and Bukit Uluwatu go up and down completely randomly.

Pair Corralation between Bank Negara and Bukit Uluwatu

Assuming the 90 days trading horizon Bank Negara is expected to generate 46.08 times less return on investment than Bukit Uluwatu. But when comparing it to its historical volatility, Bank Negara Indonesia is 2.6 times less risky than Bukit Uluwatu. It trades about 0.0 of its potential returns per unit of risk. Bukit Uluwatu Villa is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,800  in Bukit Uluwatu Villa on December 27, 2024 and sell it today you would earn a total of  1,400  from holding Bukit Uluwatu Villa or generate 24.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Bank Negara Indonesia  vs.  Bukit Uluwatu Villa

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 quite persistent forward-looking signals, Bank Negara is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bukit Uluwatu Villa

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bukit Uluwatu Villa are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Bukit Uluwatu disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Bukit Uluwatu

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

The idea behind Bank Negara Indonesia and Bukit Uluwatu Villa 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.