Correlation Between PT Bank and NuVista Energy

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

Diversification Opportunities for PT Bank and NuVista Energy

0.45

Correlation Coefficient

PT Bank  NuVista Energy

Very weak diversification

The 3 months correlation between PBCRF and NuVista is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and NuVista Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuVista Energy 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 NuVista Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuVista Energy has no effect on the direction of PT Bank i.e., PT Bank and NuVista Energy go up and down completely randomly.

Pair Corralation between PT Bank and NuVista Energy

Assuming the 90 days horizon PT Bank Central is expected to under-perform the NuVista Energy. In addition to that, PT Bank is 2.19 times more volatile than NuVista Energy. It trades about -0.01 of its total potential returns per unit of risk. NuVista Energy is currently generating about 0.01 per unit of volatility. If you would invest  946.00  in NuVista Energy on December 30, 2024 and sell it today you would earn a total of  4.00  from holding NuVista Energy or generate 0.42% return on investment over 90 days.

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

PT Bank Central  vs.  NuVista Energy

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 nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NuVista Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NuVista Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NuVista Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and NuVista Energy

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

The idea behind PT Bank Central and NuVista Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.