Correlation Between Popular and PT Bank

Can any of the company-specific risk be diversified away by investing in both Popular and PT Bank 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 Popular and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Popular and PT Bank Rakyat, you can compare the effects of market volatilities on Popular and PT Bank 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 Popular with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Popular and PT Bank.

Diversification Opportunities for Popular and PT Bank

0.17

Correlation Coefficient

Popular  PT Bank

Average diversification

The 3 months correlation between Popular and BKRKF is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Popular and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and Popular 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 Popular are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Popular i.e., Popular and PT Bank go up and down completely randomly.

Pair Corralation between Popular and PT Bank

Assuming the 90 days horizon Popular is expected to under-perform the PT Bank. But the pink sheet apears to be less risky and, when comparing its historical volatility, Popular is 11.04 times less risky than PT Bank. The pink sheet trades about -0.03 of its potential returns per unit of risk. The PT Bank Rakyat is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  23.00  in PT Bank Rakyat on December 23, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.43%
Values	Daily Returns

Popular  vs.  PT Bank Rakyat

Popular

Risk-Adjusted Performance

Very Weak

Over the last 90 days Popular has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Popular is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PT Bank Rakyat

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Popular and PT Bank

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

The idea behind Popular and PT Bank Rakyat 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.