Correlation Between PT Bank and AmTrust Financial

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

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

Diversification Opportunities for PT Bank and AmTrust Financial

-0.6

Correlation Coefficient

PT Bank  AmTrust Financial

Excellent diversification

The 3 months correlation between BKRKF and AmTrust is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and PT Bank 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 PT Bank Rakyat are associated (or correlated) with AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of PT Bank i.e., PT Bank and AmTrust Financial go up and down completely randomly.

Pair Corralation between PT Bank and AmTrust Financial

Assuming the 90 days horizon PT Bank is expected to generate 1.03 times less return on investment than AmTrust Financial. In addition to that, PT Bank is 2.67 times more volatile than AmTrust Financial Services. It trades about 0.02 of its total potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.06 per unit of volatility. If you would invest  1,212  in AmTrust Financial Services on September 3, 2024 and sell it today you would earn a total of  174.00  from holding AmTrust Financial Services or generate 14.36% return on investment over 90 days.

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

PT Bank Rakyat  vs.  AmTrust Financial Services

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AmTrust Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, AmTrust Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PT Bank and AmTrust Financial

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

The idea behind PT Bank Rakyat and AmTrust Financial Services 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.