Correlation Between PT Bank and Great West

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

Diversification Opportunities for PT Bank and Great West

-0.25

Correlation Coefficient

PT Bank  Great West

Very good diversification

The 3 months correlation between BYRA and Great is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of PT Bank i.e., PT Bank and Great West go up and down completely randomly.

Pair Corralation between PT Bank and Great West

Assuming the 90 days trading horizon PT Bank Rakyat is expected to generate 4.95 times more return on investment than Great West. However, PT Bank is 4.95 times more volatile than Great West Lifeco. It trades about 0.2 of its potential returns per unit of risk. Great West Lifeco is currently generating about -0.06 per unit of risk. If you would invest  23.00  in PT Bank Rakyat on October 25, 2024 and sell it today you would earn a total of  4.00  from holding PT Bank Rakyat or generate 17.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

PT Bank Rakyat  vs.  Great West Lifeco

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Great West Lifeco

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PT Bank and Great West

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

The idea behind PT Bank Rakyat and Great West Lifeco 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.