Correlation Between PT Bank and Adidas AG

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

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

Diversification Opportunities for PT Bank and Adidas AG

0.33

Correlation Coefficient

PT Bank  Adidas AG

Weak diversification

The 3 months correlation between BYRA and Adidas is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Rakyat are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of PT Bank i.e., PT Bank and Adidas AG go up and down completely randomly.

Pair Corralation between PT Bank and Adidas AG

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the Adidas AG. In addition to that, PT Bank is 4.42 times more volatile than adidas AG. It trades about -0.02 of its total potential returns per unit of risk. adidas AG is currently generating about -0.05 per unit of volatility. If you would invest  23,570  in adidas AG on December 21, 2024 and sell it today you would lose (1,170) from holding adidas AG or give up 4.96% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  adidas AG

PT Bank Rakyat

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

adidas AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adidas AG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PT Bank and Adidas AG

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

The idea behind PT Bank Rakyat and adidas AG 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.