Correlation Between PT Bank and Beijing Tong

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

Diversification Opportunities for PT Bank and Beijing Tong

0.17

Correlation Coefficient

PT Bank  Beijing Tong

Average diversification

The 3 months correlation between PQ9 and Beijing is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Beijing Tong Ren in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Tong Ren 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 Beijing Tong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Tong Ren has no effect on the direction of PT Bank i.e., PT Bank and Beijing Tong go up and down completely randomly.

Pair Corralation between PT Bank and Beijing Tong

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Beijing Tong. In addition to that, PT Bank is 4.34 times more volatile than Beijing Tong Ren. It trades about -0.01 of its total potential returns per unit of risk. Beijing Tong Ren is currently generating about -0.02 per unit of volatility. If you would invest  105.00  in Beijing Tong Ren on December 28, 2024 and sell it today you would lose (3.00) from holding Beijing Tong Ren or give up 2.86% of portfolio value over 90 days.

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

PT Bank Mandiri  vs.  Beijing Tong Ren

PT Bank Mandiri

Risk-Adjusted Performance

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.

Beijing Tong Ren

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Tong Ren has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Beijing Tong is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and Beijing Tong

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

The idea behind PT Bank Mandiri and Beijing Tong Ren 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..