Correlation Between PT Bank and Century Financial

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

Diversification Opportunities for PT Bank and Century Financial

0.21

Correlation Coefficient

PT Bank  Century Financial

Modest diversification

The 3 months correlation between BKRKF and Century is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Century Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Financial Corp 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 Century Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Financial Corp has no effect on the direction of PT Bank i.e., PT Bank and Century Financial go up and down completely randomly.

Pair Corralation between PT Bank and Century Financial

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 5.65 times more return on investment than Century Financial. However, PT Bank is 5.65 times more volatile than Century Financial Corp. It trades about 0.06 of its potential returns per unit of risk. Century Financial Corp is currently generating about 0.26 per unit of risk. If you would invest  22.00  in PT Bank Rakyat on December 3, 2024 and sell it today you would earn a total of  2.00  from holding PT Bank Rakyat or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

PT Bank Rakyat  vs.  Century Financial Corp

PT Bank Rakyat

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Century Financial Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Financial Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Century Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Century Financial

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

The idea behind PT Bank Rakyat and Century Financial Corp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.