Correlation Between Nedbank and PT Bank

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

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

Diversification Opportunities for Nedbank and PT Bank

0.7

Correlation Coefficient

Nedbank  PT Bank

Poor diversification

The 3 months correlation between Nedbank and PBCRF is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nedbank Group and PT Bank Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Central and Nedbank 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 Nedbank 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 Central has no effect on the direction of Nedbank i.e., Nedbank and PT Bank go up and down completely randomly.

Pair Corralation between Nedbank and PT Bank

Assuming the 90 days horizon Nedbank is expected to generate 1.07 times less return on investment than PT Bank. But when comparing it to its historical volatility, Nedbank Group is 1.82 times less risky than PT Bank. It trades about 0.05 of its potential returns per unit of risk. PT Bank Central is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  51.00  in PT Bank Central on October 9, 2024 and sell it today you would earn a total of  10.00  from holding PT Bank Central or generate 19.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.38%
Values	Daily Returns

Nedbank Group  vs.  PT Bank Central

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Nedbank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators 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 Nedbank and PT Bank

The main advantage of trading using opposite Nedbank and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nedbank 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 Nedbank Group and PT Bank Central 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.