Correlation Between Bank Rakyat and PT Techno9

Can any of the company-specific risk be diversified away by investing in both Bank Rakyat and PT Techno9 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 Rakyat and PT Techno9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Rakyat Indonesia and PT Techno9 Indonesia, you can compare the effects of market volatilities on Bank Rakyat and PT Techno9 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 Rakyat with a short position of PT Techno9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and PT Techno9.

Diversification Opportunities for Bank Rakyat and PT Techno9

-0.46

Correlation Coefficient

Bank Rakyat  PT Techno9

Very good diversification

The 3 months correlation between Bank and NINE is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and PT Techno9 Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Techno9 Indonesia and Bank Rakyat 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 Rakyat Indonesia are associated (or correlated) with PT Techno9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Techno9 Indonesia has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and PT Techno9 go up and down completely randomly.

Pair Corralation between Bank Rakyat and PT Techno9

Assuming the 90 days trading horizon Bank Rakyat is expected to generate 27.75 times less return on investment than PT Techno9. But when comparing it to its historical volatility, Bank Rakyat Indonesia is 2.11 times less risky than PT Techno9. It trades about 0.01 of its potential returns per unit of risk. PT Techno9 Indonesia is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  12,900  in PT Techno9 Indonesia on December 29, 2024 and sell it today you would earn a total of  6,600  from holding PT Techno9 Indonesia or generate 51.16% return on investment over 90 days.

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

Bank Rakyat Indonesia  vs.  PT Techno9 Indonesia

Bank Rakyat Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Rakyat Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Rakyat is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Techno9 Indonesia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Techno9 Indonesia are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Techno9 disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Rakyat and PT Techno9

The main advantage of trading using opposite Bank Rakyat and PT Techno9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Rakyat position performs unexpectedly, PT Techno9 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 Techno9 will offset losses from the drop in PT Techno9's long position.

The idea behind Bank Rakyat Indonesia and PT Techno9 Indonesia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.