Correlation Between PT Bank and Central Japan

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

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

Diversification Opportunities for PT Bank and Central Japan

-0.6

Correlation Coefficient

PT Bank  Central Japan

Excellent diversification

The 3 months correlation between PBCRF and Central is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and Central Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Japan Railway and PT Bank 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 Bank Central are associated (or correlated) with Central Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Japan Railway has no effect on the direction of PT Bank i.e., PT Bank and Central Japan go up and down completely randomly.

Pair Corralation between PT Bank and Central Japan

Assuming the 90 days horizon PT Bank Central is expected to under-perform the Central Japan. In addition to that, PT Bank is 3.35 times more volatile than Central Japan Railway. It trades about -0.03 of its total potential returns per unit of risk. Central Japan Railway is currently generating about 0.09 per unit of volatility. If you would invest  924.00  in Central Japan Railway on December 26, 2024 and sell it today you would earn a total of  69.00  from holding Central Japan Railway or generate 7.47% return on investment over 90 days.

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

PT Bank Central  vs.  Central Japan Railway

PT Bank Central

Risk-Adjusted Performance

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.

Central Japan Railway

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Japan Railway are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Central Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PT Bank and Central Japan

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

The idea behind PT Bank Central and Central Japan Railway 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.