Correlation Between ITALIAN WINE and PT Bank

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

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

Diversification Opportunities for ITALIAN WINE and PT Bank

-0.52

Correlation Coefficient

ITALIAN WINE  PT Bank

Excellent diversification

The 3 months correlation between ITALIAN and BYRA is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS 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 ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and PT Bank go up and down completely randomly.

Pair Corralation between ITALIAN WINE and PT Bank

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the PT Bank. But the stock apears to be less risky and, when comparing its historical volatility, ITALIAN WINE BRANDS is 2.84 times less risky than PT Bank. The stock trades about -0.01 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  25.00  in PT Bank Rakyat on October 4, 2024 and sell it today you would lose (3.00) from holding PT Bank Rakyat or give up 12.0% of portfolio value over 90 days.

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

ITALIAN WINE BRANDS  vs.  PT Bank Rakyat

ITALIAN WINE BRANDS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITALIAN WINE reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ITALIAN WINE and PT Bank

The main advantage of trading using opposite ITALIAN WINE and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.