Correlation Between COMMERCIAL VEHICLE and PT Bank

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

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

Diversification Opportunities for COMMERCIAL VEHICLE and PT Bank

0.8

Correlation Coefficient

COMMERCIAL VEHICLE  PT Bank

Very poor diversification

The 3 months correlation between COMMERCIAL and BYRA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and PT Bank go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and PT Bank

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the PT Bank. In addition to that, COMMERCIAL VEHICLE is 1.26 times more volatile than PT Bank Rakyat. It trades about -0.1 of its total potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.07 per unit of volatility. If you would invest  28.00  in PT Bank Rakyat on September 2, 2024 and sell it today you would lose (5.00) from holding PT Bank Rakyat or give up 17.86% of portfolio value over 90 days.

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

COMMERCIAL VEHICLE  vs.  PT Bank Rakyat

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with COMMERCIAL VEHICLE and PT Bank

The main advantage of trading using opposite COMMERCIAL VEHICLE and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.