Correlation Between Bank Pan and DCI Indonesia

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

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

Diversification Opportunities for Bank Pan and DCI Indonesia

-0.63

Correlation Coefficient

Bank Pan  DCI Indonesia

Excellent diversification

The 3 months correlation between Bank and DCI is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank Pan Indonesia and DCI Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCI Indonesia Tbk and Bank Pan 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 Bank Pan Indonesia are associated (or correlated) with DCI Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCI Indonesia Tbk has no effect on the direction of Bank Pan i.e., Bank Pan and DCI Indonesia go up and down completely randomly.

Pair Corralation between Bank Pan and DCI Indonesia

Assuming the 90 days trading horizon Bank Pan Indonesia is expected to generate 1.25 times more return on investment than DCI Indonesia. However, Bank Pan is 1.25 times more volatile than DCI Indonesia Tbk. It trades about 0.19 of its potential returns per unit of risk. DCI Indonesia Tbk is currently generating about -0.19 per unit of risk. If you would invest  145,000  in Bank Pan Indonesia on September 13, 2024 and sell it today you would earn a total of  57,000  from holding Bank Pan Indonesia or generate 39.31% return on investment over 90 days.

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

Bank Pan Indonesia  vs.  DCI Indonesia Tbk

Bank Pan Indonesia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Pan Indonesia are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Pan disclosed solid returns over the last few months and may actually be approaching a breakup point.

DCI Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCI Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bank Pan and DCI Indonesia

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

The idea behind Bank Pan Indonesia and DCI Indonesia Tbk 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.