Correlation Between Industrial and PT Bank

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

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

Diversification Opportunities for Industrial and PT Bank

-0.44

Correlation Coefficient

Industrial  PT Bank

Very good diversification

The 3 months correlation between Industrial and BZG2 is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and PT Bank Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Central and Industrial 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 Industrial and Commercial 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 Central has no effect on the direction of Industrial i.e., Industrial and PT Bank go up and down completely randomly.

Pair Corralation between Industrial and PT Bank

Assuming the 90 days horizon Industrial and Commercial is expected to generate 1.71 times more return on investment than PT Bank. However, Industrial is 1.71 times more volatile than PT Bank Central. It trades about 0.24 of its potential returns per unit of risk. PT Bank Central is currently generating about -0.02 per unit of risk. If you would invest  47.00  in Industrial and Commercial on October 25, 2024 and sell it today you would earn a total of  14.00  from holding Industrial and Commercial or generate 29.79% return on investment over 90 days.

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

Industrial and Commercial  vs.  PT Bank Central

Industrial and Commercial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental 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 Industrial and PT Bank

The main advantage of trading using opposite Industrial and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial and PT Bank Central 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.