Correlation Between Bank Permata and Bakrie Brothers

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

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

Diversification Opportunities for Bank Permata and Bakrie Brothers

-0.65

Correlation Coefficient

Bank Permata  Bakrie Brothers

Excellent diversification

The 3 months correlation between Bank and Bakrie is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank Permata Tbk and Bakrie Brothers Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrie Brothers Tbk and Bank Permata 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 Permata Tbk are associated (or correlated) with Bakrie Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrie Brothers Tbk has no effect on the direction of Bank Permata i.e., Bank Permata and Bakrie Brothers go up and down completely randomly.

Pair Corralation between Bank Permata and Bakrie Brothers

Assuming the 90 days trading horizon Bank Permata Tbk is expected to generate 1.06 times more return on investment than Bakrie Brothers. However, Bank Permata is 1.06 times more volatile than Bakrie Brothers Tbk. It trades about 0.4 of its potential returns per unit of risk. Bakrie Brothers Tbk is currently generating about -0.04 per unit of risk. If you would invest  94,500  in Bank Permata Tbk on December 30, 2024 and sell it today you would earn a total of  158,500  from holding Bank Permata Tbk or generate 167.72% return on investment over 90 days.

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

Bank Permata Tbk  vs.  Bakrie Brothers Tbk

Bank Permata Tbk

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Permata Tbk are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Permata disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bakrie Brothers Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakrie Brothers Tbk 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 Permata and Bakrie Brothers

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

The idea behind Bank Permata Tbk and Bakrie Brothers Tbk 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.