Correlation Between Bank Maybank and Bank Pan

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

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

Diversification Opportunities for Bank Maybank and Bank Pan

0.75

Correlation Coefficient

Bank Maybank  Bank Pan

Poor diversification

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

Pair Corralation between Bank Maybank and Bank Pan

Assuming the 90 days trading horizon Bank Maybank Indonesia is expected to under-perform the Bank Pan. But the stock apears to be less risky and, when comparing its historical volatility, Bank Maybank Indonesia is 2.92 times less risky than Bank Pan. The stock trades about -0.13 of its potential returns per unit of risk. The Bank Pan Indonesia is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  186,000  in Bank Pan Indonesia on December 29, 2024 and sell it today you would lose (20,000) from holding Bank Pan Indonesia or give up 10.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bank Maybank Indonesia  vs.  Bank Pan Indonesia

Bank Maybank Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Maybank Indonesia 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.

Bank Pan Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Pan Indonesia 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 Bank Maybank and Bank Pan

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

The idea behind Bank Maybank Indonesia and Bank Pan Indonesia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.