Correlation Between DAIRY FARM and PT Bank

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

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

Diversification Opportunities for DAIRY FARM and PT Bank

-0.65

Correlation Coefficient

DAIRY FARM  PT Bank

Excellent diversification

The 3 months correlation between DAIRY and BYRA is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL 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 DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and PT Bank go up and down completely randomly.

Pair Corralation between DAIRY FARM and PT Bank

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 0.52 times more return on investment than PT Bank. However, DAIRY FARM INTL is 1.92 times less risky than PT Bank. It trades about 0.24 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.02 per unit of risk. If you would invest  165.00  in DAIRY FARM INTL on September 3, 2024 and sell it today you would earn a total of  69.00  from holding DAIRY FARM INTL or generate 41.82% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  PT Bank Rakyat

DAIRY FARM INTL

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, DAIRY FARM unveiled 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 basic indicators, PT Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DAIRY FARM and PT Bank

The main advantage of trading using opposite DAIRY FARM and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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 DAIRY FARM INTL 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.