Correlation Between PT Bank and Two Rivers

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

Diversification Opportunities for PT Bank and Two Rivers

-0.6

Correlation Coefficient

PT Bank  Two Rivers

Excellent diversification

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

Pair Corralation between PT Bank and Two Rivers

Assuming the 90 days horizon PT Bank Rakyat is expected to under-perform the Two Rivers. In addition to that, PT Bank is 3.89 times more volatile than Two Rivers Financial. It trades about -0.03 of its total potential returns per unit of risk. Two Rivers Financial is currently generating about 0.21 per unit of volatility. If you would invest  2,894  in Two Rivers Financial on September 13, 2024 and sell it today you would earn a total of  608.00  from holding Two Rivers Financial or generate 21.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

PT Bank Rakyat  vs.  Two Rivers Financial

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.

Two Rivers Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Two Rivers Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Two Rivers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Two Rivers

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

The idea behind PT Bank Rakyat and Two Rivers Financial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.