Correlation Between PT Bank and DAI NIPPON

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

Diversification Opportunities for PT Bank and DAI NIPPON

0.75

Correlation Coefficient

PT Bank  DAI NIPPON

Poor diversification

The 3 months correlation between BYRA and DAI is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and DAI NIPPON PRINTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAI NIPPON PRINTING 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 DAI NIPPON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAI NIPPON PRINTING has no effect on the direction of PT Bank i.e., PT Bank and DAI NIPPON go up and down completely randomly.

Pair Corralation between PT Bank and DAI NIPPON

Assuming the 90 days trading horizon PT Bank Rakyat is expected to generate 5.12 times more return on investment than DAI NIPPON. However, PT Bank is 5.12 times more volatile than DAI NIPPON PRINTING. It trades about 0.03 of its potential returns per unit of risk. DAI NIPPON PRINTING is currently generating about 0.07 per unit of risk. If you would invest  26.00  in PT Bank Rakyat on October 23, 2024 and sell it today you would earn a total of  0.00  from holding PT Bank Rakyat or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

PT Bank Rakyat  vs.  DAI NIPPON PRINTING

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

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 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.

DAI NIPPON PRINTING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DAI NIPPON PRINTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PT Bank and DAI NIPPON

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

The idea behind PT Bank Rakyat and DAI NIPPON PRINTING 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.