Correlation Between PT Bank and Middlebury National

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

Diversification Opportunities for PT Bank and Middlebury National

-0.6

Correlation Coefficient

PT Bank  Middlebury National

Excellent diversification

The 3 months correlation between BKRKF and Middlebury is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Middlebury National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlebury National 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 Middlebury National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlebury National has no effect on the direction of PT Bank i.e., PT Bank and Middlebury National go up and down completely randomly.

Pair Corralation between PT Bank and Middlebury National

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 1.67 times more return on investment than Middlebury National. However, PT Bank is 1.67 times more volatile than Middlebury National. It trades about 0.03 of its potential returns per unit of risk. Middlebury National is currently generating about 0.03 per unit of risk. If you would invest  25.00  in PT Bank Rakyat on September 26, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 4.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.66%
Values	Daily Returns

PT Bank Rakyat  vs.  Middlebury National

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 unsteady 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.

Middlebury National

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Middlebury National are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Middlebury National unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Middlebury National

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

The idea behind PT Bank Rakyat and Middlebury National 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.