Correlation Between PT Bank and First Community

Can any of the company-specific risk be diversified away by investing in both PT Bank and First Community 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 First Community 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 First Community, you can compare the effects of market volatilities on PT Bank and First Community 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 First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and First Community.

Diversification Opportunities for PT Bank and First Community

-0.76

Correlation Coefficient

PT Bank  First Community

Pay attention - limited upside

The 3 months correlation between PBCRF and First is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of PT Bank i.e., PT Bank and First Community go up and down completely randomly.

Pair Corralation between PT Bank and First Community

Assuming the 90 days horizon PT Bank Central is expected to generate 2.63 times more return on investment than First Community. However, PT Bank is 2.63 times more volatile than First Community. It trades about 0.03 of its potential returns per unit of risk. First Community is currently generating about 0.03 per unit of risk. If you would invest  51.00  in PT Bank Central on October 10, 2024 and sell it today you would earn a total of  8.00  from holding PT Bank Central or generate 15.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.98%
Values	Daily Returns

PT Bank Central  vs.  First Community

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 fragile 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.

First Community

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Community is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PT Bank and First Community

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

The idea behind PT Bank Central and First Community 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.