Correlation Between PT Bank and KYUSHU EL

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

By analyzing existing cross correlation between PT Bank Mandiri and KYUSHU EL PWR, you can compare the effects of market volatilities on PT Bank and KYUSHU EL 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 KYUSHU EL. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and KYUSHU EL.

Diversification Opportunities for PT Bank and KYUSHU EL

0.78

Correlation Coefficient

PT Bank  KYUSHU EL

Poor diversification

The 3 months correlation between PQ9 and KYUSHU is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and KYUSHU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KYUSHU EL PWR 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 Mandiri are associated (or correlated) with KYUSHU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KYUSHU EL PWR has no effect on the direction of PT Bank i.e., PT Bank and KYUSHU EL go up and down completely randomly.

Pair Corralation between PT Bank and KYUSHU EL

Assuming the 90 days horizon PT Bank Mandiri is expected to generate 2.12 times more return on investment than KYUSHU EL. However, PT Bank is 2.12 times more volatile than KYUSHU EL PWR. It trades about 0.04 of its potential returns per unit of risk. KYUSHU EL PWR is currently generating about 0.06 per unit of risk. If you would invest  27.00  in PT Bank Mandiri on October 4, 2024 and sell it today you would earn a total of  9.00  from holding PT Bank Mandiri or generate 33.33% return on investment over 90 days.

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

PT Bank Mandiri  vs.  KYUSHU EL PWR

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

KYUSHU EL PWR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KYUSHU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Pair Trading with PT Bank and KYUSHU EL

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

The idea behind PT Bank Mandiri and KYUSHU EL PWR 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.