Correlation Between CIB Marine and PT Bank

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

By analyzing existing cross correlation between CIB Marine Bancshares and PT Bank Rakyat, you can compare the effects of market volatilities on CIB Marine and PT Bank 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 CIB Marine with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIB Marine and PT Bank.

Diversification Opportunities for CIB Marine and PT Bank

-0.58

Correlation Coefficient

CIB Marine  PT Bank

Excellent diversification

The 3 months correlation between CIB and BKRKF is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding CIB Marine Bancshares and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and CIB Marine 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 CIB Marine Bancshares are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of CIB Marine i.e., CIB Marine and PT Bank go up and down completely randomly.

Pair Corralation between CIB Marine and PT Bank

Given the investment horizon of 90 days CIB Marine Bancshares is expected to generate 0.59 times more return on investment than PT Bank. However, CIB Marine Bancshares is 1.69 times less risky than PT Bank. It trades about 0.19 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.0 per unit of risk. If you would invest  1,915  in CIB Marine Bancshares on September 13, 2024 and sell it today you would earn a total of  910.00  from holding CIB Marine Bancshares or generate 47.52% return on investment over 90 days.

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

CIB Marine Bancshares  vs.  PT Bank Rakyat

CIB Marine Bancshares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIB Marine Bancshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, CIB Marine demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable forward-looking signals, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CIB Marine and PT Bank

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

The idea behind CIB Marine Bancshares and PT Bank Rakyat 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.