Correlation Between PT Bank and A1

Can any of the company-specific risk be diversified away by investing in both PT Bank and A1 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 A1 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 A1 Group, you can compare the effects of market volatilities on PT Bank and A1 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 A1. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and A1.

Diversification Opportunities for PT Bank and A1

0.5

Correlation Coefficient

PT Bank  A1

Very weak diversification

The 3 months correlation between BKRKF and A1 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and A1 Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1 Group 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 A1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1 Group has no effect on the direction of PT Bank i.e., PT Bank and A1 go up and down completely randomly.

Pair Corralation between PT Bank and A1

Assuming the 90 days horizon PT Bank is expected to generate 9.76 times less return on investment than A1. But when comparing it to its historical volatility, PT Bank Rakyat is 2.92 times less risky than A1. It trades about 0.02 of its potential returns per unit of risk. A1 Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.22  in A1 Group on October 21, 2024 and sell it today you would earn a total of  0.05  from holding A1 Group or generate 22.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.85%
Values	Daily Returns

PT Bank Rakyat  vs.  A1 Group

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 nearly stable forward-looking signals, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

A1 Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A1 Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, A1 is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PT Bank and A1

The main advantage of trading using opposite PT Bank and A1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, A1 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 A1 will offset losses from the drop in A1's long position.

The idea behind PT Bank Rakyat and A1 Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.