Correlation Between PT Bank and Johnson Electric

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

Diversification Opportunities for PT Bank and Johnson Electric

-0.35

Correlation Coefficient

PT Bank  Johnson Electric

Very good diversification

The 3 months correlation between BYRA and Johnson is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Johnson Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Electric Holdings 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 Johnson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Electric Holdings has no effect on the direction of PT Bank i.e., PT Bank and Johnson Electric go up and down completely randomly.

Pair Corralation between PT Bank and Johnson Electric

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the Johnson Electric. In addition to that, PT Bank is 2.05 times more volatile than Johnson Electric Holdings. It trades about -0.07 of its total potential returns per unit of risk. Johnson Electric Holdings is currently generating about 0.13 per unit of volatility. If you would invest  111.00  in Johnson Electric Holdings on October 22, 2024 and sell it today you would earn a total of  20.00  from holding Johnson Electric Holdings or generate 18.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PT Bank Rakyat  vs.  Johnson Electric Holdings

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Johnson Electric Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Electric Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Johnson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Johnson Electric

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

The idea behind PT Bank Rakyat and Johnson Electric Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.