Correlation Between PT Bank and NIPPON STEEL

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

Diversification Opportunities for PT Bank and NIPPON STEEL

-0.2

Correlation Coefficient

PT Bank  NIPPON STEEL

Good diversification

The 3 months correlation between BOZA and NIPPON is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR 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 NIPPON STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON STEEL SPADR has no effect on the direction of PT Bank i.e., PT Bank and NIPPON STEEL go up and down completely randomly.

Pair Corralation between PT Bank and NIPPON STEEL

Assuming the 90 days trading horizon PT Bank Maybank is expected to under-perform the NIPPON STEEL. In addition to that, PT Bank is 2.4 times more volatile than NIPPON STEEL SPADR. It trades about -0.02 of its total potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about -0.02 per unit of volatility. If you would invest  637.00  in NIPPON STEEL SPADR on October 20, 2024 and sell it today you would lose (37.00) from holding NIPPON STEEL SPADR or give up 5.81% of portfolio value over 90 days.

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

PT Bank Maybank  vs.  NIPPON STEEL SPADR

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NIPPON STEEL SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON STEEL SPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NIPPON STEEL 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 NIPPON STEEL

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

The idea behind PT Bank Maybank and NIPPON STEEL SPADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..