Correlation Between PT Bank and Japan Post

Can any of the company-specific risk be diversified away by investing in both PT Bank and Japan Post 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 Japan Post into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Bank Central and Japan Post Bank, you can compare the effects of market volatilities on PT Bank and Japan Post 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 Japan Post. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Japan Post.

Diversification Opportunities for PT Bank and Japan Post

-0.41

Correlation Coefficient

PT Bank  Japan Post

Very good diversification

The 3 months correlation between BZG2 and Japan is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and Japan Post Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Bank 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 Central are associated (or correlated) with Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Bank has no effect on the direction of PT Bank i.e., PT Bank and Japan Post go up and down completely randomly.

Pair Corralation between PT Bank and Japan Post

Assuming the 90 days trading horizon PT Bank Central is expected to under-perform the Japan Post. In addition to that, PT Bank is 3.1 times more volatile than Japan Post Bank. It trades about -0.11 of its total potential returns per unit of risk. Japan Post Bank is currently generating about -0.01 per unit of volatility. If you would invest  920.00  in Japan Post Bank on October 10, 2024 and sell it today you would lose (5.00) from holding Japan Post Bank or give up 0.54% of portfolio value over 90 days.

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

PT Bank Central  vs.  Japan Post Bank

PT Bank Central

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Central are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, PT Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Post Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Post reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Japan Post

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

The idea behind PT Bank Central and Japan Post Bank 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.