Correlation Between Bank Negara and Hanjaya Mandala

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

Diversification Opportunities for Bank Negara and Hanjaya Mandala

0.22

Correlation Coefficient

Bank Negara  Hanjaya Mandala

Modest diversification

The 3 months correlation between Bank and Hanjaya is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Hanjaya Mandala Sampoerna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjaya Mandala Sampoerna 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 Hanjaya Mandala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjaya Mandala Sampoerna has no effect on the direction of Bank Negara i.e., Bank Negara and Hanjaya Mandala go up and down completely randomly.

Pair Corralation between Bank Negara and Hanjaya Mandala

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the Hanjaya Mandala. In addition to that, Bank Negara is 2.81 times more volatile than Hanjaya Mandala Sampoerna. It trades about -0.1 of its total potential returns per unit of risk. Hanjaya Mandala Sampoerna is currently generating about -0.24 per unit of volatility. If you would invest  65,000  in Hanjaya Mandala Sampoerna on November 28, 2024 and sell it today you would lose (8,500) from holding Hanjaya Mandala Sampoerna or give up 13.08% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  Hanjaya Mandala Sampoerna

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.

Hanjaya Mandala Sampoerna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanjaya Mandala Sampoerna 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 Hanjaya Mandala

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

The idea behind Bank Negara Indonesia and Hanjaya Mandala Sampoerna 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.