Correlation Between Citra Marga and Bank Negara

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

By analyzing existing cross correlation between Citra Marga Nusaphala and Bank Negara Indonesia, you can compare the effects of market volatilities on Citra Marga and Bank Negara 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 Citra Marga with a short position of Bank Negara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citra Marga and Bank Negara.

Diversification Opportunities for Citra Marga and Bank Negara

0.52

Correlation Coefficient

Citra Marga  Bank Negara

Very weak diversification

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

Pair Corralation between Citra Marga and Bank Negara

Assuming the 90 days trading horizon Citra Marga Nusaphala is expected to generate 2.47 times more return on investment than Bank Negara. However, Citra Marga is 2.47 times more volatile than Bank Negara Indonesia. It trades about 0.05 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about 0.0 per unit of risk. If you would invest  143,000  in Citra Marga Nusaphala on December 29, 2024 and sell it today you would earn a total of  12,500  from holding Citra Marga Nusaphala or generate 8.74% return on investment over 90 days.

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

Citra Marga Nusaphala  vs.  Bank Negara Indonesia

Citra Marga Nusaphala

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citra Marga Nusaphala are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Citra Marga disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Negara Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Negara Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Negara is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citra Marga and Bank Negara

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

The idea behind Citra Marga Nusaphala and Bank Negara Indonesia 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 Transaction History module to view history of all your transactions and understand their impact on performance.