Correlation Between PT Bank and SCOTTIE RESOURCES

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

Diversification Opportunities for PT Bank and SCOTTIE RESOURCES

0.67

Correlation Coefficient

PT Bank  SCOTTIE RESOURCES

Poor diversification

The 3 months correlation between PQ9 and SCOTTIE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and SCOTTIE RESOURCES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTTIE RESOURCES 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 SCOTTIE RESOURCES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTTIE RESOURCES has no effect on the direction of PT Bank i.e., PT Bank and SCOTTIE RESOURCES go up and down completely randomly.

Pair Corralation between PT Bank and SCOTTIE RESOURCES

Assuming the 90 days horizon PT Bank Mandiri is expected to generate 0.28 times more return on investment than SCOTTIE RESOURCES. However, PT Bank Mandiri is 3.59 times less risky than SCOTTIE RESOURCES. It trades about 0.08 of its potential returns per unit of risk. SCOTTIE RESOURCES P is currently generating about -0.24 per unit of risk. If you would invest  34.00  in PT Bank Mandiri on October 3, 2024 and sell it today you would earn a total of  2.00  from holding PT Bank Mandiri or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

PT Bank Mandiri  vs.  SCOTTIE RESOURCES P

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 nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SCOTTIE RESOURCES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCOTTIE RESOURCES P 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.

Pair Trading with PT Bank and SCOTTIE RESOURCES

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

The idea behind PT Bank Mandiri and SCOTTIE RESOURCES P 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.