Correlation Between PT Bank and THORNEY TECHS

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

Diversification Opportunities for PT Bank and THORNEY TECHS

-0.06

Correlation Coefficient

PT Bank  THORNEY TECHS

Good diversification

The 3 months correlation between BOZA and THORNEY is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of PT Bank i.e., PT Bank and THORNEY TECHS go up and down completely randomly.

Pair Corralation between PT Bank and THORNEY TECHS

Assuming the 90 days trading horizon PT Bank Maybank is expected to generate 1.03 times more return on investment than THORNEY TECHS. However, PT Bank is 1.03 times more volatile than THORNEY TECHS LTD. It trades about 0.01 of its potential returns per unit of risk. THORNEY TECHS LTD is currently generating about 0.0 per unit of risk. If you would invest  1.25  in PT Bank Maybank on September 17, 2024 and sell it today you would lose (0.05) from holding PT Bank Maybank or give up 4.0% 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.  THORNEY TECHS LTD

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.

THORNEY TECHS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PT Bank and THORNEY TECHS

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

The idea behind PT Bank Maybank and THORNEY TECHS LTD 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..