Correlation Between Bank Negara and Pakuwon Jati

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

Diversification Opportunities for Bank Negara and Pakuwon Jati

0.76

Correlation Coefficient

Bank Negara  Pakuwon Jati

Poor diversification

The 3 months correlation between Bank and Pakuwon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Pakuwon Jati Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakuwon Jati Tbk 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 Pakuwon Jati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakuwon Jati Tbk has no effect on the direction of Bank Negara i.e., Bank Negara and Pakuwon Jati go up and down completely randomly.

Pair Corralation between Bank Negara and Pakuwon Jati

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the Pakuwon Jati. In addition to that, Bank Negara is 1.41 times more volatile than Pakuwon Jati Tbk. It trades about -0.07 of its total potential returns per unit of risk. Pakuwon Jati Tbk is currently generating about -0.06 per unit of volatility. If you would invest  41,800  in Pakuwon Jati Tbk on November 29, 2024 and sell it today you would lose (3,200) from holding Pakuwon Jati Tbk or give up 7.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Bank Negara Indonesia  vs.  Pakuwon Jati Tbk

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.

Pakuwon Jati Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pakuwon Jati 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 Negara and Pakuwon Jati

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

The idea behind Bank Negara Indonesia and Pakuwon Jati 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.