Correlation Between PT Bank and TFS FINANCIAL

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

Diversification Opportunities for PT Bank and TFS FINANCIAL

-0.36

Correlation Coefficient

PT Bank  TFS FINANCIAL

Very good diversification

The 3 months correlation between BOZA and TFS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and TFS FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS FINANCIAL 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 TFS FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS FINANCIAL has no effect on the direction of PT Bank i.e., PT Bank and TFS FINANCIAL go up and down completely randomly.

Pair Corralation between PT Bank and TFS FINANCIAL

Assuming the 90 days trading horizon PT Bank is expected to generate 2.55 times less return on investment than TFS FINANCIAL. In addition to that, PT Bank is 1.42 times more volatile than TFS FINANCIAL. It trades about 0.07 of its total potential returns per unit of risk. TFS FINANCIAL is currently generating about 0.24 per unit of volatility. If you would invest  1,170  in TFS FINANCIAL on September 2, 2024 and sell it today you would earn a total of  160.00  from holding TFS FINANCIAL or generate 13.68% return on investment over 90 days.

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

PT Bank Maybank  vs.  TFS FINANCIAL

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.

TFS FINANCIAL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and TFS FINANCIAL

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

The idea behind PT Bank Maybank and TFS FINANCIAL 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.