Correlation Between PT Bank and SHOPRITE HLDG

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

Diversification Opportunities for PT Bank and SHOPRITE HLDG

0.81

Correlation Coefficient

PT Bank  SHOPRITE HLDG

Very poor diversification

The 3 months correlation between PQ9 and SHOPRITE is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and SHOPRITE HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHOPRITE HLDG 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 SHOPRITE HLDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHOPRITE HLDG has no effect on the direction of PT Bank i.e., PT Bank and SHOPRITE HLDG go up and down completely randomly.

Pair Corralation between PT Bank and SHOPRITE HLDG

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the SHOPRITE HLDG. In addition to that, PT Bank is 3.37 times more volatile than SHOPRITE HLDG. It trades about -0.05 of its total potential returns per unit of risk. SHOPRITE HLDG is currently generating about -0.13 per unit of volatility. If you would invest  1,560  in SHOPRITE HLDG on December 21, 2024 and sell it today you would lose (190.00) from holding SHOPRITE HLDG or give up 12.18% of portfolio value over 90 days.

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

PT Bank Mandiri  vs.  SHOPRITE HLDG

PT Bank Mandiri

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SHOPRITE HLDG

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHOPRITE HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PT Bank and SHOPRITE HLDG

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

The idea behind PT Bank Mandiri and SHOPRITE HLDG 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.