Correlation Between Permanent TSB and PT Bank

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

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

Diversification Opportunities for Permanent TSB and PT Bank

0.6

Correlation Coefficient

Permanent TSB  PT Bank

Poor diversification

The 3 months correlation between Permanent and BKRKF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Permanent TSB Group 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 Permanent TSB 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 Permanent TSB Group 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 Permanent TSB i.e., Permanent TSB and PT Bank go up and down completely randomly.

Pair Corralation between Permanent TSB and PT Bank

Assuming the 90 days horizon Permanent TSB Group is expected to under-perform the PT Bank. But the pink sheet apears to be less risky and, when comparing its historical volatility, Permanent TSB Group is 2.73 times less risky than PT Bank. The pink sheet trades about -0.07 of its potential returns per unit of risk. The PT Bank Rakyat is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  28.00  in PT Bank Rakyat on October 10, 2024 and sell it today you would lose (6.00) from holding PT Bank Rakyat or give up 21.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Permanent TSB Group  vs.  PT Bank Rakyat

Permanent TSB Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permanent TSB Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Permanent TSB and PT Bank

The main advantage of trading using opposite Permanent TSB and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permanent TSB 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 Permanent TSB Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.