Correlation Between PT Bank and China Minsh

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

Diversification Opportunities for PT Bank and China Minsh

-0.28

Correlation Coefficient

PT Bank  China Minsh

Very good diversification

The 3 months correlation between BKRKF and China is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and China Minsh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Minsh 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 China Minsh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Minsh has no effect on the direction of PT Bank i.e., PT Bank and China Minsh go up and down completely randomly.

Pair Corralation between PT Bank and China Minsh

Assuming the 90 days horizon PT Bank is expected to generate 2.02 times less return on investment than China Minsh. But when comparing it to its historical volatility, PT Bank Rakyat is 1.28 times less risky than China Minsh. It trades about 0.03 of its potential returns per unit of risk. China Minsh is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  334.00  in China Minsh on September 26, 2024 and sell it today you would earn a total of  64.00  from holding China Minsh or generate 19.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.21%
Values	Daily Returns

PT Bank Rakyat  vs.  China Minsh

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 unsteady 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.

China Minsh

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Minsh are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, China Minsh may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and China Minsh

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

The idea behind PT Bank Rakyat and China Minsh 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.