Correlation Between HK Electric and PT Bank

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

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

Diversification Opportunities for HK Electric and PT Bank

0.27

Correlation Coefficient

HK Electric  PT Bank

Modest diversification

The 3 months correlation between HKT and PQ9 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments 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 HK Electric 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 HK Electric Investments 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 HK Electric i.e., HK Electric and PT Bank go up and down completely randomly.

Pair Corralation between HK Electric and PT Bank

Assuming the 90 days trading horizon HK Electric Investments is expected to under-perform the PT Bank. But the stock apears to be less risky and, when comparing its historical volatility, HK Electric Investments is 9.72 times less risky than PT Bank. The stock trades about -0.07 of its potential returns per unit of risk. The PT Bank Mandiri is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  32.00  in PT Bank Mandiri on December 27, 2024 and sell it today you would lose (1.00) from holding PT Bank Mandiri or give up 3.12% of portfolio value over 90 days.

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

HK Electric Investments  vs.  PT Bank Mandiri

HK Electric Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days HK Electric Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HK Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

PT Bank Mandiri

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Mandiri are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PT Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HK Electric and PT Bank

The main advantage of trading using opposite HK Electric and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric 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 HK Electric Investments 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.