Correlation Between PT Bank and First Northern

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

Diversification Opportunities for PT Bank and First Northern

0.77

Correlation Coefficient

PT Bank  First Northern

Poor diversification

The 3 months correlation between BKRKF and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and First Northern Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northern Community 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 First Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northern Community has no effect on the direction of PT Bank i.e., PT Bank and First Northern go up and down completely randomly.

Pair Corralation between PT Bank and First Northern

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 23.19 times more return on investment than First Northern. However, PT Bank is 23.19 times more volatile than First Northern Community. It trades about 0.06 of its potential returns per unit of risk. First Northern Community is currently generating about -0.17 per unit of risk. If you would invest  28.00  in PT Bank Rakyat on September 13, 2024 and sell it today you would earn a total of  1.00  from holding PT Bank Rakyat or generate 3.57% return on investment over 90 days.

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

PT Bank Rakyat  vs.  First Northern Community

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.

First Northern Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Northern Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First Northern is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PT Bank and First Northern

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

The idea behind PT Bank Rakyat and First Northern Community 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.