Correlation Between PT Bank and CosmoSteel Holdings

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

Diversification Opportunities for PT Bank and CosmoSteel Holdings

0.01

Correlation Coefficient

PT Bank  CosmoSteel Holdings

Significant diversification

The 3 months correlation between BOZA and CosmoSteel is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings 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 CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of PT Bank i.e., PT Bank and CosmoSteel Holdings go up and down completely randomly.

Pair Corralation between PT Bank and CosmoSteel Holdings

Assuming the 90 days trading horizon PT Bank is expected to generate 13.05 times less return on investment than CosmoSteel Holdings. In addition to that, PT Bank is 1.3 times more volatile than CosmoSteel Holdings Limited. It trades about 0.01 of its total potential returns per unit of risk. CosmoSteel Holdings Limited is currently generating about 0.09 per unit of volatility. If you would invest  6.10  in CosmoSteel Holdings Limited on September 18, 2024 and sell it today you would earn a total of  1.00  from holding CosmoSteel Holdings Limited or generate 16.39% return on investment over 90 days.

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

PT Bank Maybank  vs.  CosmoSteel Holdings Limited

PT Bank Maybank

Risk-Adjusted Performance

0 of 100

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.

CosmoSteel Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CosmoSteel Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and CosmoSteel Holdings

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

The idea behind PT Bank Maybank and CosmoSteel Holdings Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.