Correlation Between PREMIER FOODS and PT Bank

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

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

Diversification Opportunities for PREMIER FOODS and PT Bank

0.43

Correlation Coefficient

PREMIER FOODS  PT Bank

Very weak diversification

The 3 months correlation between PREMIER and BOZA is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and PT Bank Maybank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Maybank and PREMIER FOODS 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 PREMIER FOODS 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 Maybank has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and PT Bank go up and down completely randomly.

Pair Corralation between PREMIER FOODS and PT Bank

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.23 times more return on investment than PT Bank. However, PREMIER FOODS is 4.35 times less risky than PT Bank. It trades about -0.06 of its potential returns per unit of risk. PT Bank Maybank is currently generating about -0.03 per unit of risk. If you would invest  220.00  in PREMIER FOODS on October 20, 2024 and sell it today you would lose (8.00) from holding PREMIER FOODS or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

PREMIER FOODS  vs.  PT Bank Maybank

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PT Bank Maybank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Maybank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PREMIER FOODS and PT Bank

The main advantage of trading using opposite PREMIER FOODS and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS 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 PREMIER FOODS and PT Bank Maybank 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.