Correlation Between BANK CIMB and WisdomTree Investments

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

By analyzing existing cross correlation between BANK CIMB NIAGA and WisdomTree Investments, you can compare the effects of market volatilities on BANK CIMB and WisdomTree Investments 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 CIMB with a short position of WisdomTree Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK CIMB and WisdomTree Investments.

Diversification Opportunities for BANK CIMB and WisdomTree Investments

-0.33

Correlation Coefficient

BANK CIMB  WisdomTree Investments

Very good diversification

The 3 months correlation between BANK and WisdomTree is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BANK CIMB NIAGA and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments and BANK CIMB 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 CIMB NIAGA are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of BANK CIMB i.e., BANK CIMB and WisdomTree Investments go up and down completely randomly.

Pair Corralation between BANK CIMB and WisdomTree Investments

Assuming the 90 days trading horizon BANK CIMB NIAGA is expected to generate 0.97 times more return on investment than WisdomTree Investments. However, BANK CIMB NIAGA is 1.03 times less risky than WisdomTree Investments. It trades about -0.12 of its potential returns per unit of risk. WisdomTree Investments is currently generating about -0.23 per unit of risk. If you would invest  10.00  in BANK CIMB NIAGA on October 10, 2024 and sell it today you would lose (0.45) from holding BANK CIMB NIAGA or give up 4.5% of portfolio value over 90 days.

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

BANK CIMB NIAGA  vs.  WisdomTree Investments

BANK CIMB NIAGA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CIMB NIAGA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BANK CIMB is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WisdomTree Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK CIMB and WisdomTree Investments

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

The idea behind BANK CIMB NIAGA and WisdomTree Investments 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.