Correlation Between PT Bank and Volkswagen

Can any of the company-specific risk be diversified away by investing in both PT Bank and Volkswagen 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 Volkswagen 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 Volkswagen AG 110, you can compare the effects of market volatilities on PT Bank and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Volkswagen.

Diversification Opportunities for PT Bank and Volkswagen

0.75

Correlation Coefficient

PT Bank  Volkswagen

Poor diversification

The 3 months correlation between BKRKF and Volkswagen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of PT Bank i.e., PT Bank and Volkswagen go up and down completely randomly.

Pair Corralation between PT Bank and Volkswagen

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 2.8 times more return on investment than Volkswagen. However, PT Bank is 2.8 times more volatile than Volkswagen AG 110. It trades about -0.05 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.18 per unit of risk. If you would invest  34.00  in PT Bank Rakyat on August 30, 2024 and sell it today you would lose (8.00) from holding PT Bank Rakyat or give up 23.53% 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.  Volkswagen AG 110

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 fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PT Bank and Volkswagen

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

The idea behind PT Bank Rakyat and Volkswagen AG 110 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.