Correlation Between PT Bank and Seafarer Exploration

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

Diversification Opportunities for PT Bank and Seafarer Exploration

0.73

Correlation Coefficient

PT Bank  Seafarer Exploration

Poor diversification

The 3 months correlation between PBCRF and Seafarer is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and Seafarer Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Exploration 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 Seafarer Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Exploration has no effect on the direction of PT Bank i.e., PT Bank and Seafarer Exploration go up and down completely randomly.

Pair Corralation between PT Bank and Seafarer Exploration

Assuming the 90 days horizon PT Bank is expected to generate 3.62 times less return on investment than Seafarer Exploration. But when comparing it to its historical volatility, PT Bank Central is 2.25 times less risky than Seafarer Exploration. It trades about 0.02 of its potential returns per unit of risk. Seafarer Exploration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.48  in Seafarer Exploration on October 11, 2024 and sell it today you would lose (0.03) from holding Seafarer Exploration or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.19%
Values	Daily Returns

PT Bank Central  vs.  Seafarer Exploration

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 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.

Seafarer Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seafarer Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PT Bank and Seafarer Exploration

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

The idea behind PT Bank Central and Seafarer Exploration 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..