Correlation Between PT Bank and RWE AG

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

Diversification Opportunities for PT Bank and RWE AG

0.55

Correlation Coefficient

PT Bank  RWE AG

Very weak diversification

The 3 months correlation between BYRA and RWE is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of PT Bank i.e., PT Bank and RWE AG go up and down completely randomly.

Pair Corralation between PT Bank and RWE AG

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the RWE AG. In addition to that, PT Bank is 3.01 times more volatile than RWE AG. It trades about -0.16 of its total potential returns per unit of risk. RWE AG is currently generating about -0.05 per unit of volatility. If you would invest  3,080  in RWE AG on October 8, 2024 and sell it today you would lose (49.00) from holding RWE AG or give up 1.59% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  RWE AG

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.

RWE AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RWE AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RWE AG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PT Bank and RWE AG

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

The idea behind PT Bank Rakyat and RWE AG 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.