Correlation Between Bank Pembangunan and Inocycle Technology

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

By analyzing existing cross correlation between Bank Pembangunan Daerah and Inocycle Technology Tbk, you can compare the effects of market volatilities on Bank Pembangunan and Inocycle Technology 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 Pembangunan with a short position of Inocycle Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Pembangunan and Inocycle Technology.

Diversification Opportunities for Bank Pembangunan and Inocycle Technology

0.8

Correlation Coefficient

Bank Pembangunan  Inocycle Technology

Very poor diversification

The 3 months correlation between Bank and Inocycle is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Pembangunan Daerah and Inocycle Technology Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inocycle Technology Tbk and Bank Pembangunan 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 Pembangunan Daerah are associated (or correlated) with Inocycle Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inocycle Technology Tbk has no effect on the direction of Bank Pembangunan i.e., Bank Pembangunan and Inocycle Technology go up and down completely randomly.

Pair Corralation between Bank Pembangunan and Inocycle Technology

Assuming the 90 days trading horizon Bank Pembangunan Daerah is expected to generate 1.97 times more return on investment than Inocycle Technology. However, Bank Pembangunan is 1.97 times more volatile than Inocycle Technology Tbk. It trades about 0.09 of its potential returns per unit of risk. Inocycle Technology Tbk is currently generating about 0.02 per unit of risk. If you would invest  2,700  in Bank Pembangunan Daerah on September 12, 2024 and sell it today you would earn a total of  600.00  from holding Bank Pembangunan Daerah or generate 22.22% return on investment over 90 days.

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

Bank Pembangunan Daerah  vs.  Inocycle Technology Tbk

Bank Pembangunan Daerah

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Pembangunan Daerah are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Pembangunan disclosed solid returns over the last few months and may actually be approaching a breakup point.

Inocycle Technology Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inocycle Technology Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Inocycle Technology is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Pembangunan and Inocycle Technology

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

The idea behind Bank Pembangunan Daerah and Inocycle Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.