Correlation Between PT Bank and FORTEC ELEKTRONIK

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

Diversification Opportunities for PT Bank and FORTEC ELEKTRONIK

0.62

Correlation Coefficient

PT Bank  FORTEC ELEKTRONIK

Poor diversification

The 3 months correlation between BYRA and FORTEC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and FORTEC ELEKTRONIK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORTEC ELEKTRONIK has no effect on the direction of PT Bank i.e., PT Bank and FORTEC ELEKTRONIK go up and down completely randomly.

Pair Corralation between PT Bank and FORTEC ELEKTRONIK

Assuming the 90 days trading horizon PT Bank Rakyat is expected to generate 2.37 times more return on investment than FORTEC ELEKTRONIK. However, PT Bank is 2.37 times more volatile than FORTEC ELEKTRONIK. It trades about -0.02 of its potential returns per unit of risk. FORTEC ELEKTRONIK is currently generating about -0.05 per unit of risk. If you would invest  26.00  in PT Bank Rakyat on December 21, 2024 and sell it today you would lose (5.00) from holding PT Bank Rakyat or give up 19.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

PT Bank Rakyat  vs.  FORTEC ELEKTRONIK

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 fragile 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.

FORTEC ELEKTRONIK

Risk-Adjusted Performance

Very Weak

Over the last 90 days FORTEC ELEKTRONIK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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 FORTEC ELEKTRONIK

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

The idea behind PT Bank Rakyat and FORTEC ELEKTRONIK 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..