Correlation Between PT Bank and United Overseas

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

Diversification Opportunities for PT Bank and United Overseas

-0.52

Correlation Coefficient

PT Bank  United Overseas

Excellent diversification

The 3 months correlation between BZG2 and United is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas 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 United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of PT Bank i.e., PT Bank and United Overseas go up and down completely randomly.

Pair Corralation between PT Bank and United Overseas

Assuming the 90 days trading horizon PT Bank Central is expected to generate 2.74 times more return on investment than United Overseas. However, PT Bank is 2.74 times more volatile than United Overseas Bank. It trades about 0.03 of its potential returns per unit of risk. United Overseas Bank is currently generating about 0.06 per unit of risk. If you would invest  50.00  in PT Bank Central on September 23, 2024 and sell it today you would earn a total of  8.00  from holding PT Bank Central or generate 16.0% return on investment over 90 days.

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

PT Bank Central  vs.  United Overseas Bank

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

United Overseas Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and United Overseas

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

The idea behind PT Bank Central and United Overseas 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.