Correlation Between PT Bank and GUARDANT HEALTH

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

Diversification Opportunities for PT Bank and GUARDANT HEALTH

-0.6

Correlation Coefficient

PT Bank  GUARDANT HEALTH

Excellent diversification

The 3 months correlation between PQ9 and GUARDANT is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL 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 GUARDANT HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUARDANT HEALTH CL has no effect on the direction of PT Bank i.e., PT Bank and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between PT Bank and GUARDANT HEALTH

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the GUARDANT HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, PT Bank Mandiri is 1.03 times less risky than GUARDANT HEALTH. The stock trades about -0.03 of its potential returns per unit of risk. The GUARDANT HEALTH CL is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,306  in GUARDANT HEALTH CL on September 3, 2024 and sell it today you would earn a total of  1,012  from holding GUARDANT HEALTH CL or generate 43.89% return on investment over 90 days.

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

PT Bank Mandiri  vs.  GUARDANT HEALTH CL

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 latest fragile 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.

GUARDANT HEALTH CL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GUARDANT HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and GUARDANT HEALTH

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

The idea behind PT Bank Mandiri and GUARDANT HEALTH CL 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.