Correlation Between Bank Mega and Bank Sinarmas

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

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

Diversification Opportunities for Bank Mega and Bank Sinarmas

-0.89

Correlation Coefficient

Bank Mega  Bank Sinarmas

Pay attention - limited upside

The 3 months correlation between Bank and Bank is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mega Tbk and Bank Sinarmas Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Sinarmas Tbk and Bank Mega 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 Bank Mega Tbk are associated (or correlated) with Bank Sinarmas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Sinarmas Tbk has no effect on the direction of Bank Mega i.e., Bank Mega and Bank Sinarmas go up and down completely randomly.

Pair Corralation between Bank Mega and Bank Sinarmas

Assuming the 90 days trading horizon Bank Mega Tbk is expected to under-perform the Bank Sinarmas. In addition to that, Bank Mega is 1.51 times more volatile than Bank Sinarmas Tbk. It trades about -0.12 of its total potential returns per unit of risk. Bank Sinarmas Tbk is currently generating about 0.06 per unit of volatility. If you would invest  82,000  in Bank Sinarmas Tbk on December 29, 2024 and sell it today you would earn a total of  3,500  from holding Bank Sinarmas Tbk or generate 4.27% return on investment over 90 days.

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

Bank Mega Tbk  vs.  Bank Sinarmas Tbk

Bank Mega Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Mega 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank Sinarmas Tbk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Sinarmas Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bank Sinarmas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Mega and Bank Sinarmas

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

The idea behind Bank Mega Tbk and Bank Sinarmas Tbk 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.