Correlation Between Bank Mega and Singaraja Putra

Can any of the company-specific risk be diversified away by investing in both Bank Mega and Singaraja Putra 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 Singaraja Putra 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 Singaraja Putra, you can compare the effects of market volatilities on Bank Mega and Singaraja Putra 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 Singaraja Putra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mega and Singaraja Putra.

Diversification Opportunities for Bank Mega and Singaraja Putra

-0.58

Correlation Coefficient

Bank Mega  Singaraja Putra

Excellent diversification

The 3 months correlation between Bank and Singaraja is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mega Tbk and Singaraja Putra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singaraja Putra 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 Singaraja Putra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singaraja Putra has no effect on the direction of Bank Mega i.e., Bank Mega and Singaraja Putra go up and down completely randomly.

Pair Corralation between Bank Mega and Singaraja Putra

Assuming the 90 days trading horizon Bank Mega is expected to generate 130.54 times less return on investment than Singaraja Putra. But when comparing it to its historical volatility, Bank Mega Tbk is 3.68 times less risky than Singaraja Putra. It trades about 0.0 of its potential returns per unit of risk. Singaraja Putra is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  86,500  in Singaraja Putra on September 3, 2024 and sell it today you would earn a total of  383,500  from holding Singaraja Putra or generate 443.35% return on investment over 90 days.

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

Bank Mega Tbk  vs.  Singaraja Putra

Bank Mega Tbk

Risk-Adjusted Performance

0 of 100

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 quite persistent forward-looking signals, Bank Mega is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Singaraja Putra

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singaraja Putra are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Singaraja Putra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Mega and Singaraja Putra

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

The idea behind Bank Mega Tbk and Singaraja Putra 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.