Correlation Between PT Bank and GWILLI FOOD

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

Diversification Opportunities for PT Bank and GWILLI FOOD

0.2

Correlation Coefficient

PT Bank  GWILLI FOOD

Modest diversification

The 3 months correlation between BYRA and GWILLI is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and GWILLI FOOD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GWILLI FOOD 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 GWILLI FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GWILLI FOOD has no effect on the direction of PT Bank i.e., PT Bank and GWILLI FOOD go up and down completely randomly.

Pair Corralation between PT Bank and GWILLI FOOD

Assuming the 90 days trading horizon PT Bank Rakyat is expected to generate 4.0 times more return on investment than GWILLI FOOD. However, PT Bank is 4.0 times more volatile than GWILLI FOOD. It trades about -0.01 of its potential returns per unit of risk. GWILLI FOOD is currently generating about -0.06 per unit of risk. If you would invest  22.00  in PT Bank Rakyat on December 21, 2024 and sell it today you would lose (4.00) from holding PT Bank Rakyat or give up 18.18% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  GWILLI FOOD

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. In spite of comparatively stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

GWILLI FOOD

Risk-Adjusted Performance

Very Weak

Over the last 90 days GWILLI FOOD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PT Bank and GWILLI FOOD

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

The idea behind PT Bank Rakyat and GWILLI FOOD 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.