Correlation Between First Horizon and PT Bank

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

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

Diversification Opportunities for First Horizon and PT Bank

-0.25

Correlation Coefficient

First Horizon  PT Bank

Very good diversification

The 3 months correlation between First and BKRKF is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon 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 First Horizon 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 First Horizon 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 First Horizon i.e., First Horizon and PT Bank go up and down completely randomly.

Pair Corralation between First Horizon and PT Bank

Assuming the 90 days trading horizon First Horizon is expected to generate 11.47 times less return on investment than PT Bank. But when comparing it to its historical volatility, First Horizon is 47.7 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 0.05 of returns per unit of risk over similar time horizon. If you would invest  23.00  in PT Bank Rakyat on December 29, 2024 and sell it today you would earn a total of  0.00  from holding PT Bank Rakyat or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

First Horizon  vs.  PT Bank Rakyat

First Horizon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Horizon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PT Bank Rakyat

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Horizon and PT Bank

The main advantage of trading using opposite First Horizon and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon 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 First Horizon 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.