Correlation Between PT Bank and CDN IMPERIAL

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

Diversification Opportunities for PT Bank and CDN IMPERIAL

0.42

Correlation Coefficient

PT Bank  CDN IMPERIAL

Very weak diversification

The 3 months correlation between BOZA and CDN is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK 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 CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of PT Bank i.e., PT Bank and CDN IMPERIAL go up and down completely randomly.

Pair Corralation between PT Bank and CDN IMPERIAL

Assuming the 90 days trading horizon PT Bank Maybank is expected to generate 2.47 times more return on investment than CDN IMPERIAL. However, PT Bank is 2.47 times more volatile than CDN IMPERIAL BANK. It trades about -0.02 of its potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about -0.1 per unit of risk. If you would invest  1.10  in PT Bank Maybank on December 28, 2024 and sell it today you would lose (0.10) from holding PT Bank Maybank or give up 9.09% of portfolio value over 90 days.

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

PT Bank Maybank  vs.  CDN IMPERIAL BANK

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

CDN IMPERIAL BANK

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDN IMPERIAL BANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PT Bank and CDN IMPERIAL

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

The idea behind PT Bank Maybank and CDN IMPERIAL BANK 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.