Correlation Between PT Bank and PSB Holdings

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

Diversification Opportunities for PT Bank and PSB Holdings

-0.07

Correlation Coefficient

PT Bank  PSB Holdings

Good diversification

The 3 months correlation between BKRKF and PSB is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings 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 PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of PT Bank i.e., PT Bank and PSB Holdings go up and down completely randomly.

Pair Corralation between PT Bank and PSB Holdings

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 16.02 times more return on investment than PSB Holdings. However, PT Bank is 16.02 times more volatile than PSB Holdings. It trades about 0.05 of its potential returns per unit of risk. PSB Holdings 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 Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

PT Bank Rakyat  vs.  PSB Holdings

PT Bank Rakyat

Risk-Adjusted Performance

Insignificant

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.

PSB Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PSB Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, PSB Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PT Bank and PSB Holdings

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

The idea behind PT Bank Rakyat and PSB Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.