Correlation Between Bank Negara and Sona Topas

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

Diversification Opportunities for Bank Negara and Sona Topas

-0.77

Correlation Coefficient

Bank Negara  Sona Topas

Pay attention - limited upside

The 3 months correlation between Bank and Sona is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Sona Topas Tourism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sona Topas Tourism 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 Sona Topas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sona Topas Tourism has no effect on the direction of Bank Negara i.e., Bank Negara and Sona Topas go up and down completely randomly.

Pair Corralation between Bank Negara and Sona Topas

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the Sona Topas. But the stock apears to be less risky and, when comparing its historical volatility, Bank Negara Indonesia is 5.17 times less risky than Sona Topas. The stock trades about -0.14 of its potential returns per unit of risk. The Sona Topas Tourism is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  435,000  in Sona Topas Tourism on September 4, 2024 and sell it today you would earn a total of  167,500  from holding Sona Topas Tourism or generate 38.51% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Sona Topas Tourism

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 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.

Sona Topas Tourism

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sona Topas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Sona Topas

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

The idea behind Bank Negara Indonesia and Sona Topas Tourism 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.