Correlation Between PT Bank and Beijing Tong

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

Diversification Opportunities for PT Bank and Beijing Tong

-0.33

Correlation Coefficient

PT Bank  Beijing Tong

Very good diversification

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

Pair Corralation between PT Bank and Beijing Tong

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the Beijing Tong. In addition to that, PT Bank is 1.64 times more volatile than Beijing Tong Ren. It trades about -0.04 of its total potential returns per unit of risk. Beijing Tong Ren is currently generating about 0.12 per unit of volatility. If you would invest  81.00  in Beijing Tong Ren on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Beijing Tong Ren or generate 20.99% 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.  Beijing Tong Ren

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 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.

Beijing Tong Ren

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Tong Ren are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Beijing Tong reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Beijing Tong

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

The idea behind PT Bank Rakyat and Beijing Tong Ren 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 Transaction History module to view history of all your transactions and understand their impact on performance.