Correlation Between PT Bank and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both PT Bank and NextSource Materials 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 NextSource Materials 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 NextSource Materials, you can compare the effects of market volatilities on PT Bank and NextSource Materials 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 NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and NextSource Materials.
Diversification Opportunities for PT Bank and NextSource Materials
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BKRKF and NextSource is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials 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 NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of PT Bank i.e., PT Bank and NextSource Materials go up and down completely randomly.
Pair Corralation between PT Bank and NextSource Materials
Assuming the 90 days horizon PT Bank Rakyat is expected to under-perform the NextSource Materials. In addition to that, PT Bank is 1.43 times more volatile than NextSource Materials. It trades about -0.07 of its total potential returns per unit of risk. NextSource Materials is currently generating about -0.05 per unit of volatility. If you would invest 51.00 in NextSource Materials on September 7, 2024 and sell it today you would lose (8.00) from holding NextSource Materials or give up 15.69% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
PT Bank Rakyat vs. NextSource Materials
Performance |
Timeline |
PT Bank Rakyat |
NextSource Materials |
PT Bank and NextSource Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PT Bank and NextSource Materials
The main advantage of trading using opposite PT Bank and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.PT Bank vs. Bank Mandiri Persero | PT Bank vs. Piraeus Bank SA | PT Bank vs. Eurobank Ergasias Services | PT Bank vs. Kasikornbank Public Co |
NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Syrah Resources Limited | NextSource Materials vs. Mason Graphite | NextSource Materials vs. Graphite One |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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