Correlation Between PT Bank and Iridium Communications

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

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

Diversification Opportunities for PT Bank and Iridium Communications

0.18

Correlation Coefficient

PT Bank  Iridium Communications

Average diversification

The 3 months correlation between BOZA and Iridium is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and PT Bank 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 PT Bank Maybank are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of PT Bank i.e., PT Bank and Iridium Communications go up and down completely randomly.

Pair Corralation between PT Bank and Iridium Communications

Assuming the 90 days trading horizon PT Bank Maybank is expected to under-perform the Iridium Communications. In addition to that, PT Bank is 1.28 times more volatile than Iridium Communications. It trades about 0.0 of its total potential returns per unit of risk. Iridium Communications is currently generating about 0.0 per unit of volatility. If you would invest  2,763  in Iridium Communications on December 29, 2024 and sell it today you would lose (65.00) from holding Iridium Communications or give up 2.35% of portfolio value over 90 days.

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

PT Bank Maybank  vs.  Iridium Communications

PT Bank Maybank

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Maybank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Iridium Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iridium Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Iridium Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and Iridium Communications

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

The idea behind PT Bank Maybank and Iridium Communications 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.