Correlation Between Fuji Media and PT Bank

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

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

Diversification Opportunities for Fuji Media and PT Bank

-0.39

Correlation Coefficient

Fuji Media  PT Bank

Very good diversification

The 3 months correlation between Fuji and PQ9 is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fuji Media Holdings and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri and Fuji Media 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 Fuji Media Holdings 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 Mandiri has no effect on the direction of Fuji Media i.e., Fuji Media and PT Bank go up and down completely randomly.

Pair Corralation between Fuji Media and PT Bank

Assuming the 90 days trading horizon Fuji Media Holdings is expected to generate 0.41 times more return on investment than PT Bank. However, Fuji Media Holdings is 2.41 times less risky than PT Bank. It trades about -0.04 of its potential returns per unit of risk. PT Bank Mandiri is currently generating about -0.02 per unit of risk. If you would invest  1,040  in Fuji Media Holdings on October 11, 2024 and sell it today you would lose (50.00) from holding Fuji Media Holdings or give up 4.81% of portfolio value over 90 days.

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

Fuji Media Holdings  vs.  PT Bank Mandiri

Fuji Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuji Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fuji Media is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fuji Media and PT Bank

The main advantage of trading using opposite Fuji Media and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuji Media 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 Fuji Media Holdings and PT Bank Mandiri 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.