Correlation Between PT Bank and Givaudan

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

Diversification Opportunities for PT Bank and Givaudan

0.69

Correlation Coefficient

PT Bank  Givaudan

Poor diversification

The 3 months correlation between BKRKF and Givaudan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Givaudan SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA ADR 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 Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA ADR has no effect on the direction of PT Bank i.e., PT Bank and Givaudan go up and down completely randomly.

Pair Corralation between PT Bank and Givaudan

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 4.12 times more return on investment than Givaudan. However, PT Bank is 4.12 times more volatile than Givaudan SA ADR. It trades about 0.02 of its potential returns per unit of risk. Givaudan SA ADR is currently generating about 0.05 per unit of risk. If you would invest  26.00  in PT Bank Rakyat on September 3, 2024 and sell it today you would lose (2.00) from holding PT Bank Rakyat or give up 7.69% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  Givaudan SA ADR

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 fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Givaudan SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Givaudan SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PT Bank and Givaudan

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

The idea behind PT Bank Rakyat and Givaudan SA ADR 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.