Correlation Between PT Bank and Dongfeng

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

Diversification Opportunities for PT Bank and Dongfeng

-0.7

Correlation Coefficient

PT Bank  Dongfeng

Excellent diversification

The 3 months correlation between BKRKF and Dongfeng is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Dongfeng Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongfeng 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 Dongfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongfeng Group has no effect on the direction of PT Bank i.e., PT Bank and Dongfeng go up and down completely randomly.

Pair Corralation between PT Bank and Dongfeng

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 1.12 times more return on investment than Dongfeng. However, PT Bank is 1.12 times more volatile than Dongfeng Group. It trades about 0.02 of its potential returns per unit of risk. Dongfeng Group is currently generating about 0.02 per unit of risk. If you would invest  29.00  in PT Bank Rakyat on September 19, 2024 and sell it today you would lose (3.00) from holding PT Bank Rakyat or give up 10.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	81.82%
Values	Daily Returns

PT Bank Rakyat  vs.  Dongfeng 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 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.

Dongfeng Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dongfeng Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Dongfeng reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Dongfeng

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

The idea behind PT Bank Rakyat and Dongfeng 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.