Correlation Between PT Bank and Japan Steel

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

Diversification Opportunities for PT Bank and Japan Steel

-0.47

Correlation Coefficient

PT Bank  Japan Steel

Very good diversification

The 3 months correlation between PQ9 and Japan is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel 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 Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of PT Bank i.e., PT Bank and Japan Steel go up and down completely randomly.

Pair Corralation between PT Bank and Japan Steel

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Japan Steel. In addition to that, PT Bank is 1.59 times more volatile than The Japan Steel. It trades about -0.03 of its total potential returns per unit of risk. The Japan Steel is currently generating about 0.06 per unit of volatility. If you would invest  3,260  in The Japan Steel on October 22, 2024 and sell it today you would earn a total of  260.00  from holding The Japan Steel or generate 7.98% return on investment over 90 days.

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

PT Bank Mandiri  vs.  The Japan Steel

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 uncertain 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.

Japan Steel

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Steel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PT Bank and Japan Steel

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

The idea behind PT Bank Mandiri and The Japan Steel 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.