Correlation Between PT Bank and PEPKOR

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

Diversification Opportunities for PT Bank and PEPKOR

-0.64

Correlation Coefficient

PT Bank  PEPKOR

Excellent diversification

The 3 months correlation between PQ9 and PEPKOR is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and PEPKOR LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPKOR LTD 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 PEPKOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPKOR LTD has no effect on the direction of PT Bank i.e., PT Bank and PEPKOR go up and down completely randomly.

Pair Corralation between PT Bank and PEPKOR

Assuming the 90 days horizon PT Bank is expected to generate 4.09 times less return on investment than PEPKOR. But when comparing it to its historical volatility, PT Bank Mandiri is 1.48 times less risky than PEPKOR. It trades about 0.03 of its potential returns per unit of risk. PEPKOR LTD is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  25.00  in PEPKOR LTD on September 23, 2024 and sell it today you would earn a total of  134.00  from holding PEPKOR LTD or generate 536.0% 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.  PEPKOR LTD

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

PEPKOR LTD

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PEPKOR LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PEPKOR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and PEPKOR

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

The idea behind PT Bank Mandiri and PEPKOR LTD 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.