Correlation Between Bank Negara and PT Charlie

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

Diversification Opportunities for Bank Negara and PT Charlie

-0.44

Correlation Coefficient

Bank Negara  PT Charlie

Very good diversification

The 3 months correlation between Bank and RSCH is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and PT Charlie Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Charlie Hospital 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 Charlie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Charlie Hospital has no effect on the direction of Bank Negara i.e., Bank Negara and PT Charlie go up and down completely randomly.

Pair Corralation between Bank Negara and PT Charlie

Assuming the 90 days trading horizon Bank Negara is expected to generate 24.05 times less return on investment than PT Charlie. But when comparing it to its historical volatility, Bank Negara Indonesia is 1.3 times less risky than PT Charlie. It trades about 0.0 of its potential returns per unit of risk. PT Charlie Hospital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  29,800  in PT Charlie Hospital on December 29, 2024 and sell it today you would earn a total of  3,400  from holding PT Charlie Hospital or generate 11.41% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  PT Charlie Hospital

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.

PT Charlie Hospital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Charlie Hospital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Charlie disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and PT Charlie

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

The idea behind Bank Negara Indonesia and PT Charlie Hospital 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.