Correlation Between BRIT AMER and PT Bank

Can any of the company-specific risk be diversified away by investing in both BRIT AMER and PT Bank 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 BRIT AMER and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRIT AMER TOBACCO and PT Bank Central, you can compare the effects of market volatilities on BRIT AMER and PT Bank 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 BRIT AMER with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and PT Bank.

Diversification Opportunities for BRIT AMER and PT Bank

-0.54

Correlation Coefficient

BRIT AMER  PT Bank

Excellent diversification

The 3 months correlation between BRIT and BZG2 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and PT Bank Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Central and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Central has no effect on the direction of BRIT AMER i.e., BRIT AMER and PT Bank go up and down completely randomly.

Pair Corralation between BRIT AMER and PT Bank

Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.38 times more return on investment than PT Bank. However, BRIT AMER TOBACCO is 2.66 times less risky than PT Bank. It trades about 0.1 of its potential returns per unit of risk. PT Bank Central is currently generating about -0.12 per unit of risk. If you would invest  3,455  in BRIT AMER TOBACCO on December 21, 2024 and sell it today you would earn a total of  332.00  from holding BRIT AMER TOBACCO or generate 9.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BRIT AMER TOBACCO  vs.  PT Bank Central

BRIT AMER TOBACCO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BRIT AMER may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PT Bank Central

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BRIT AMER and PT Bank

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

The idea behind BRIT AMER TOBACCO and PT Bank Central 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.