Correlation Between Bank Negara and PT Data

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

Diversification Opportunities for Bank Negara and PT Data

-0.28

Correlation Coefficient

Bank Negara  PT Data

Very good diversification

The 3 months correlation between Bank and ELIT is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and PT Data Sinergitama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Data Sinergitama 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 PT Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Data Sinergitama has no effect on the direction of Bank Negara i.e., Bank Negara and PT Data go up and down completely randomly.

Pair Corralation between Bank Negara and PT Data

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to generate 1.79 times more return on investment than PT Data. However, Bank Negara is 1.79 times more volatile than PT Data Sinergitama. It trades about 0.03 of its potential returns per unit of risk. PT Data Sinergitama is currently generating about -0.01 per unit of risk. If you would invest  440,213  in Bank Negara Indonesia on September 1, 2024 and sell it today you would earn a total of  57,787  from holding Bank Negara Indonesia or generate 13.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.72%
Values	Daily Returns

Bank Negara Indonesia  vs.  PT Data Sinergitama

Bank Negara Indonesia

Risk-Adjusted Performance

0 of 100

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.

PT Data Sinergitama

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Data Sinergitama are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Data 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 Negara and PT Data

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

The idea behind Bank Negara Indonesia and PT Data Sinergitama 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.