Correlation Between PT Bank and Sofina Société

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

Diversification Opportunities for PT Bank and Sofina Société

0.38

Correlation Coefficient

PT Bank  Sofina Société

Weak diversification

The 3 months correlation between PBCRF and Sofina is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and Sofina Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sofina Socit Anonyme 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 Sofina Société. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sofina Socit Anonyme has no effect on the direction of PT Bank i.e., PT Bank and Sofina Société go up and down completely randomly.

Pair Corralation between PT Bank and Sofina Société

Assuming the 90 days horizon PT Bank Central is expected to generate 5.63 times more return on investment than Sofina Société. However, PT Bank is 5.63 times more volatile than Sofina Socit Anonyme. It trades about 0.02 of its potential returns per unit of risk. Sofina Socit Anonyme is currently generating about 0.02 per unit of risk. If you would invest  58.00  in PT Bank Central on October 22, 2024 and sell it today you would lose (2.00) from holding PT Bank Central or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.78%
Values	Daily Returns

PT Bank Central  vs.  Sofina Socit Anonyme

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofina Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sofina Société is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and Sofina Société

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

The idea behind PT Bank Central and Sofina Socit Anonyme 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.