Correlation Between PT Bank and Peoples Insurance

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

Diversification Opportunities for PT Bank and Peoples Insurance

-0.6

Correlation Coefficient

PT Bank  Peoples Insurance

Excellent diversification

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

Pair Corralation between PT Bank and Peoples Insurance

Assuming the 90 days horizon PT Bank is expected to generate 4.03 times less return on investment than Peoples Insurance. In addition to that, PT Bank is 1.45 times more volatile than The Peoples Insurance. It trades about 0.04 of its total potential returns per unit of risk. The Peoples Insurance is currently generating about 0.21 per unit of volatility. If you would invest  29.00  in The Peoples Insurance on September 28, 2024 and sell it today you would earn a total of  7.00  from holding The Peoples Insurance or generate 24.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

PT Bank Rakyat  vs.  The Peoples Insurance

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 nearly stable forward-looking signals, PT Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Peoples Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Peoples Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Peoples Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Peoples Insurance

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

The idea behind PT Bank Rakyat and The Peoples Insurance 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.