Correlation Between Bakrie Brothers and Bank Cimb

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

By analyzing existing cross correlation between Bakrie Brothers Tbk and Bank Cimb Niaga, you can compare the effects of market volatilities on Bakrie Brothers and Bank Cimb 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 Bakrie Brothers with a short position of Bank Cimb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Brothers and Bank Cimb.

Diversification Opportunities for Bakrie Brothers and Bank Cimb

-0.5

Correlation Coefficient

Bakrie Brothers  Bank Cimb

Very good diversification

The 3 months correlation between Bakrie and Bank is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Brothers Tbk and Bank Cimb Niaga in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Cimb Niaga and Bakrie Brothers 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 Bakrie Brothers Tbk are associated (or correlated) with Bank Cimb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Cimb Niaga has no effect on the direction of Bakrie Brothers i.e., Bakrie Brothers and Bank Cimb go up and down completely randomly.

Pair Corralation between Bakrie Brothers and Bank Cimb

Assuming the 90 days trading horizon Bakrie Brothers Tbk is expected to generate 4.37 times more return on investment than Bank Cimb. However, Bakrie Brothers is 4.37 times more volatile than Bank Cimb Niaga. It trades about 0.08 of its potential returns per unit of risk. Bank Cimb Niaga is currently generating about -0.09 per unit of risk. If you would invest  4,000  in Bakrie Brothers Tbk on September 3, 2024 and sell it today you would earn a total of  700.00  from holding Bakrie Brothers Tbk or generate 17.5% return on investment over 90 days.

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

Bakrie Brothers Tbk  vs.  Bank Cimb Niaga

Bakrie Brothers Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bakrie Brothers Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bakrie Brothers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Cimb Niaga

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Cimb Niaga has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bakrie Brothers and Bank Cimb

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

The idea behind Bakrie Brothers Tbk and Bank Cimb Niaga 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.