Correlation Between PT Techno9 and Bank Rakyat

Can any of the company-specific risk be diversified away by investing in both PT Techno9 and Bank Rakyat 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 PT Techno9 and Bank Rakyat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Techno9 Indonesia and Bank Rakyat Indonesia, you can compare the effects of market volatilities on PT Techno9 and Bank Rakyat 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 PT Techno9 with a short position of Bank Rakyat. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Techno9 and Bank Rakyat.

Diversification Opportunities for PT Techno9 and Bank Rakyat

-0.62

Correlation Coefficient

PT Techno9  Bank Rakyat

Excellent diversification

The 3 months correlation between NINE and Bank is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PT Techno9 Indonesia and Bank Rakyat Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat Indonesia and PT Techno9 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 PT Techno9 Indonesia are associated (or correlated) with Bank Rakyat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Rakyat Indonesia has no effect on the direction of PT Techno9 i.e., PT Techno9 and Bank Rakyat go up and down completely randomly.

Pair Corralation between PT Techno9 and Bank Rakyat

Assuming the 90 days trading horizon PT Techno9 Indonesia is expected to generate 2.11 times more return on investment than Bank Rakyat. However, PT Techno9 is 2.11 times more volatile than Bank Rakyat Indonesia. It trades about 0.14 of its potential returns per unit of risk. Bank Rakyat Indonesia is currently generating about 0.01 per unit of risk. If you would invest  12,900  in PT Techno9 Indonesia on December 30, 2024 and sell it today you would earn a total of  6,600  from holding PT Techno9 Indonesia or generate 51.16% return on investment over 90 days.

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

PT Techno9 Indonesia  vs.  Bank Rakyat Indonesia

PT Techno9 Indonesia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Techno9 Indonesia are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Techno9 disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Rakyat Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Rakyat Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Rakyat 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 PT Techno9 and Bank Rakyat

The main advantage of trading using opposite PT Techno9 and Bank Rakyat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Techno9 position performs unexpectedly, Bank Rakyat 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 Rakyat will offset losses from the drop in Bank Rakyat's long position.

The idea behind PT Techno9 Indonesia and Bank Rakyat Indonesia 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 Transaction History module to view history of all your transactions and understand their impact on performance.