Correlation Between PT Bank and New Pacific

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

Diversification Opportunities for PT Bank and New Pacific

0.04

Correlation Coefficient

PT Bank  New Pacific

Significant diversification

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

Pair Corralation between PT Bank and New Pacific

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 2.46 times more return on investment than New Pacific. However, PT Bank is 2.46 times more volatile than New Pacific Metals. It trades about 0.05 of its potential returns per unit of risk. New Pacific Metals is currently generating about 0.04 per unit of risk. If you would invest  23.00  in PT Bank Rakyat on December 28, 2024 and sell it today you would earn a total of  0.00  from holding PT Bank Rakyat or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

PT Bank Rakyat  vs.  New Pacific Metals

PT Bank Rakyat

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

New Pacific Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New Pacific Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, New Pacific may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PT Bank and New Pacific

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

The idea behind PT Bank Rakyat and New Pacific Metals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.