Correlation Between PT Bank and Southern Michigan

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

Diversification Opportunities for PT Bank and Southern Michigan

-0.69

Correlation Coefficient

PT Bank  Southern Michigan

Excellent diversification

The 3 months correlation between BKRKF and Southern is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Southern Michigan Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Michigan Bancorp 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 Southern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Michigan Bancorp has no effect on the direction of PT Bank i.e., PT Bank and Southern Michigan go up and down completely randomly.

Pair Corralation between PT Bank and Southern Michigan

Assuming the 90 days horizon PT Bank is expected to generate 1.06 times less return on investment than Southern Michigan. In addition to that, PT Bank is 3.87 times more volatile than Southern Michigan Bancorp. It trades about 0.02 of its total potential returns per unit of risk. Southern Michigan Bancorp is currently generating about 0.07 per unit of volatility. If you would invest  1,543  in Southern Michigan Bancorp on September 14, 2024 and sell it today you would earn a total of  382.00  from holding Southern Michigan Bancorp or generate 24.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.14%
Values	Daily Returns

PT Bank Rakyat  vs.  Southern Michigan Bancorp

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 latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Southern Michigan Bancorp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Michigan Bancorp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Southern Michigan exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Southern Michigan

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

The idea behind PT Bank Rakyat and Southern Michigan Bancorp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.