Correlation Between Bank Negara and Summarecon Agung

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

Diversification Opportunities for Bank Negara and Summarecon Agung

0.69

Correlation Coefficient

Bank Negara  Summarecon Agung

Poor diversification

The 3 months correlation between Bank and Summarecon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Summarecon Agung Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summarecon Agung 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 Summarecon Agung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summarecon Agung Tbk has no effect on the direction of Bank Negara i.e., Bank Negara and Summarecon Agung go up and down completely randomly.

Pair Corralation between Bank Negara and Summarecon Agung

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to generate 2.53 times more return on investment than Summarecon Agung. However, Bank Negara is 2.53 times more volatile than Summarecon Agung Tbk. It trades about 0.03 of its potential returns per unit of risk. Summarecon Agung Tbk is currently generating about 0.0 per unit of risk. If you would invest  435,736  in Bank Negara Indonesia on September 2, 2024 and sell it today you would earn a total of  62,264  from holding Bank Negara Indonesia or generate 14.29% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Summarecon Agung Tbk

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.

Summarecon Agung Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summarecon Agung 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 Summarecon Agung

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

The idea behind Bank Negara Indonesia and Summarecon Agung 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.