Correlation Between PT Bank and FFW

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

Diversification Opportunities for PT Bank and FFW

-0.06

Correlation Coefficient

PT Bank  FFW

Good diversification

The 3 months correlation between BKRKF and FFW is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and FFW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FFW Corporation 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 FFW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FFW Corporation has no effect on the direction of PT Bank i.e., PT Bank and FFW go up and down completely randomly.

Pair Corralation between PT Bank and FFW

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 16.42 times more return on investment than FFW. However, PT Bank is 16.42 times more volatile than FFW Corporation. It trades about 0.12 of its potential returns per unit of risk. FFW Corporation is currently generating about 0.22 per unit of risk. If you would invest  21.00  in PT Bank Rakyat on October 20, 2024 and sell it today you would earn a total of  3.00  from holding PT Bank Rakyat or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PT Bank Rakyat  vs.  FFW Corp.

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.

FFW Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FFW Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, FFW is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PT Bank and FFW

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

The idea behind PT Bank Rakyat and FFW Corporation 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.