Correlation Between BFI Finance and Paninvest Tbk

Can any of the company-specific risk be diversified away by investing in both BFI Finance and Paninvest Tbk 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 BFI Finance and Paninvest Tbk into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for BFI Finance and Paninvest Tbk

-0.49

Correlation Coefficient

BFI Finance  Paninvest Tbk

Very good diversification

The 3 months correlation between BFI and Paninvest is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding BFI Finance Indonesia and Paninvest Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paninvest Tbk and BFI Finance 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 BFI Finance Indonesia are associated (or correlated) with Paninvest Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paninvest Tbk has no effect on the direction of BFI Finance i.e., BFI Finance and Paninvest Tbk go up and down completely randomly.

Pair Corralation between BFI Finance and Paninvest Tbk

Assuming the 90 days trading horizon BFI Finance Indonesia is expected to under-perform the Paninvest Tbk. But the stock apears to be less risky and, when comparing its historical volatility, BFI Finance Indonesia is 1.24 times less risky than Paninvest Tbk. The stock trades about -0.04 of its potential returns per unit of risk. The Paninvest Tbk is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  93,500  in Paninvest Tbk on September 5, 2024 and sell it today you would earn a total of  20,000  from holding Paninvest Tbk or generate 21.39% return on investment over 90 days.

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

BFI Finance Indonesia  vs.  Paninvest Tbk

BFI Finance Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Paninvest Tbk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paninvest Tbk are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Paninvest Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BFI Finance and Paninvest Tbk

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

The idea behind BFI Finance Indonesia and Paninvest 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.