Correlation Between PT Bank and Main Street

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

Diversification Opportunities for PT Bank and Main Street

-0.04

Correlation Coefficient

PT Bank  Main Street

Good diversification

The 3 months correlation between BKRKF and Main is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of PT Bank i.e., PT Bank and Main Street go up and down completely randomly.

Pair Corralation between PT Bank and Main Street

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 10.7 times more return on investment than Main Street. However, PT Bank is 10.7 times more volatile than Main Street Financial. It trades about 0.01 of its potential returns per unit of risk. Main Street Financial is currently generating about -0.04 per unit of risk. If you would invest  23.00  in PT Bank Rakyat on December 25, 2024 and sell it today you would lose (4.00) from holding PT Bank Rakyat or give up 17.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.53%
Values	Daily Returns

PT Bank Rakyat  vs.  Main Street Financial

PT Bank Rakyat

Risk-Adjusted Performance

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 fragile forward-looking signals, PT Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Main Street Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Street Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PT Bank and Main Street

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

The idea behind PT Bank Rakyat and Main Street Financial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.