Correlation Between PT Bank and Allied Properties

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

Diversification Opportunities for PT Bank and Allied Properties

0.29

Correlation Coefficient

PT Bank  Allied Properties

Modest diversification

The 3 months correlation between BKRKF and Allied is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Allied Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Properties Real 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 Allied Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Properties Real has no effect on the direction of PT Bank i.e., PT Bank and Allied Properties go up and down completely randomly.

Pair Corralation between PT Bank and Allied Properties

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 5.6 times more return on investment than Allied Properties. However, PT Bank is 5.6 times more volatile than Allied Properties Real. It trades about 0.04 of its potential returns per unit of risk. Allied Properties Real is currently generating about -0.04 per unit of risk. If you would invest  23.00  in PT Bank Rakyat on December 20, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 4.35% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  Allied Properties Real

PT Bank Rakyat

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Allied Properties Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Allied Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and Allied Properties

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

The idea behind PT Bank Rakyat and Allied Properties Real 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.