Correlation Between Bank Negara and Wijaya Karya

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

Diversification Opportunities for Bank Negara and Wijaya Karya

0.88

Correlation Coefficient

Bank Negara  Wijaya Karya

Very poor diversification

The 3 months correlation between Bank and Wijaya is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Wijaya Karya Beton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wijaya Karya Beton 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 Wijaya Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wijaya Karya Beton has no effect on the direction of Bank Negara i.e., Bank Negara and Wijaya Karya go up and down completely randomly.

Pair Corralation between Bank Negara and Wijaya Karya

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to generate 1.21 times more return on investment than Wijaya Karya. However, Bank Negara is 1.21 times more volatile than Wijaya Karya Beton. It trades about 0.03 of its potential returns per unit of risk. Wijaya Karya Beton is currently generating about -0.02 per unit of risk. If you would invest  426,587  in Bank Negara Indonesia on September 14, 2024 and sell it today you would earn a total of  61,413  from holding Bank Negara Indonesia or generate 14.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Bank Negara Indonesia  vs.  Wijaya Karya Beton

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Wijaya Karya Beton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wijaya Karya Beton 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 January 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 Wijaya Karya

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

The idea behind Bank Negara Indonesia and Wijaya Karya Beton 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.