Correlation Between Bank Permata and PT Techno9

Can any of the company-specific risk be diversified away by investing in both Bank Permata and PT Techno9 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 PT Techno9 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 PT Techno9 Indonesia, you can compare the effects of market volatilities on Bank Permata and PT Techno9 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 PT Techno9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Permata and PT Techno9.

Diversification Opportunities for Bank Permata and PT Techno9

0.68

Correlation Coefficient

Bank Permata  PT Techno9

Poor diversification

The 3 months correlation between Bank and NINE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank Permata Tbk and PT Techno9 Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Techno9 Indonesia 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 PT Techno9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Techno9 Indonesia has no effect on the direction of Bank Permata i.e., Bank Permata and PT Techno9 go up and down completely randomly.

Pair Corralation between Bank Permata and PT Techno9

Assuming the 90 days trading horizon Bank Permata Tbk is expected to generate 0.68 times more return on investment than PT Techno9. However, Bank Permata Tbk is 1.47 times less risky than PT Techno9. It trades about 0.4 of its potential returns per unit of risk. PT Techno9 Indonesia is currently generating about 0.14 per unit of risk. If you would invest  94,500  in Bank Permata Tbk on December 29, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bank Permata Tbk  vs.  PT Techno9 Indonesia

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.

PT Techno9 Indonesia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Techno9 Indonesia are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Techno9 disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Permata and PT Techno9

The main advantage of trading using opposite Bank Permata and PT Techno9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Permata position performs unexpectedly, PT Techno9 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 Techno9 will offset losses from the drop in PT Techno9's long position.

The idea behind Bank Permata Tbk and PT Techno9 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.