Correlation Between PT Bank and Compagnie

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

Diversification Opportunities for PT Bank and Compagnie

-0.23

Correlation Coefficient

PT Bank  Compagnie

Very good diversification

The 3 months correlation between BYRA and Compagnie is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint 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 Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of PT Bank i.e., PT Bank and Compagnie go up and down completely randomly.

Pair Corralation between PT Bank and Compagnie

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the Compagnie. In addition to that, PT Bank is 6.14 times more volatile than Compagnie de Saint Gobain. It trades about -0.11 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about -0.16 per unit of volatility. If you would invest  8,978  in Compagnie de Saint Gobain on October 10, 2024 and sell it today you would lose (348.00) from holding Compagnie de Saint Gobain or give up 3.88% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  Compagnie de Saint Gobain

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. 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.

Compagnie de Saint

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Compagnie is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PT Bank and Compagnie

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

The idea behind PT Bank Rakyat and Compagnie de Saint Gobain 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.