Correlation Between PT Bank and Brother Industries

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

Diversification Opportunities for PT Bank and Brother Industries

-0.58

Correlation Coefficient

PT Bank  Brother Industries

Excellent diversification

The 3 months correlation between BKRKF and Brother is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries 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 Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of PT Bank i.e., PT Bank and Brother Industries go up and down completely randomly.

Pair Corralation between PT Bank and Brother Industries

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 0.29 times more return on investment than Brother Industries. However, PT Bank Rakyat is 3.43 times less risky than Brother Industries. It trades about -0.03 of its potential returns per unit of risk. Brother Industries is currently generating about -0.12 per unit of risk. If you would invest  32.00  in PT Bank Rakyat on September 17, 2024 and sell it today you would lose (6.00) from holding PT Bank Rakyat or give up 18.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

PT Bank Rakyat  vs.  Brother Industries

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 latest weak performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators 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.

Pair Trading with PT Bank and Brother Industries

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

The idea behind PT Bank Rakyat and Brother Industries 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 Commodity Directory module to find actively traded commodities issued by global exchanges.