Correlation Between Indosat Tbk and Bank Cimb

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

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

Diversification Opportunities for Indosat Tbk and Bank Cimb

0.63

Correlation Coefficient

Indosat Tbk  Bank Cimb

Poor diversification

The 3 months correlation between Indosat and Bank is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Indosat Tbk and Bank Cimb Niaga in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Cimb Niaga and Indosat Tbk 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 Indosat Tbk are associated (or correlated) with Bank Cimb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Cimb Niaga has no effect on the direction of Indosat Tbk i.e., Indosat Tbk and Bank Cimb go up and down completely randomly.

Pair Corralation between Indosat Tbk and Bank Cimb

Assuming the 90 days trading horizon Indosat Tbk is expected to under-perform the Bank Cimb. In addition to that, Indosat Tbk is 3.19 times more volatile than Bank Cimb Niaga. It trades about -0.03 of its total potential returns per unit of risk. Bank Cimb Niaga is currently generating about 0.06 per unit of volatility. If you would invest  137,469  in Bank Cimb Niaga on August 31, 2024 and sell it today you would earn a total of  39,031  from holding Bank Cimb Niaga or generate 28.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.72%
Values	Daily Returns

Indosat Tbk  vs.  Bank Cimb Niaga

Indosat Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank Cimb Niaga

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Cimb Niaga has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Indosat Tbk and Bank Cimb

The main advantage of trading using opposite Indosat Tbk and Bank Cimb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indosat Tbk position performs unexpectedly, Bank Cimb 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 Bank Cimb will offset losses from the drop in Bank Cimb's long position.

The idea behind Indosat Tbk and Bank Cimb Niaga 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.