Correlation Between PT Bank and Cairo Communication

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

Diversification Opportunities for PT Bank and Cairo Communication

-0.62

Correlation Coefficient

PT Bank  Cairo Communication

Excellent diversification

The 3 months correlation between PQ9 and Cairo is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Cairo Communication SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Communication SpA 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 Cairo Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Communication SpA has no effect on the direction of PT Bank i.e., PT Bank and Cairo Communication go up and down completely randomly.

Pair Corralation between PT Bank and Cairo Communication

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Cairo Communication. In addition to that, PT Bank is 1.89 times more volatile than Cairo Communication SpA. It trades about -0.04 of its total potential returns per unit of risk. Cairo Communication SpA is currently generating about 0.16 per unit of volatility. If you would invest  199.00  in Cairo Communication SpA on October 6, 2024 and sell it today you would earn a total of  32.00  from holding Cairo Communication SpA or generate 16.08% 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.  Cairo Communication SpA

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 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.

Cairo Communication SpA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Cairo Communication may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PT Bank and Cairo Communication

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

The idea behind PT Bank Mandiri and Cairo Communication SpA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..