Correlation Between PT Bank and CHINA SOUTHN

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

Diversification Opportunities for PT Bank and CHINA SOUTHN

-0.13

Correlation Coefficient

PT Bank  CHINA SOUTHN

Good diversification

The 3 months correlation between BYRA and CHINA is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR 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 CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of PT Bank i.e., PT Bank and CHINA SOUTHN go up and down completely randomly.

Pair Corralation between PT Bank and CHINA SOUTHN

Assuming the 90 days trading horizon PT Bank Rakyat is expected to generate 2.36 times more return on investment than CHINA SOUTHN. However, PT Bank is 2.36 times more volatile than CHINA SOUTHN AIR H . It trades about -0.01 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about -0.06 per unit of risk. If you would invest  22.00  in PT Bank Rakyat on December 22, 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 Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

PT Bank Rakyat  vs.  CHINA SOUTHN AIR H

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PT Bank and CHINA SOUTHN

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

The idea behind PT Bank Rakyat and CHINA SOUTHN AIR H 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.