Correlation Between PT Bank and UNIVERSAL DISPLAY

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

Diversification Opportunities for PT Bank and UNIVERSAL DISPLAY

0.8

Correlation Coefficient

PT Bank  UNIVERSAL DISPLAY

Very poor diversification

The 3 months correlation between PQ9 and UNIVERSAL is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and UNIVERSAL DISPLAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL DISPLAY 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 UNIVERSAL DISPLAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL DISPLAY has no effect on the direction of PT Bank i.e., PT Bank and UNIVERSAL DISPLAY go up and down completely randomly.

Pair Corralation between PT Bank and UNIVERSAL DISPLAY

Assuming the 90 days horizon PT Bank Mandiri is expected to generate 2.04 times more return on investment than UNIVERSAL DISPLAY. However, PT Bank is 2.04 times more volatile than UNIVERSAL DISPLAY. It trades about 0.03 of its potential returns per unit of risk. UNIVERSAL DISPLAY is currently generating about 0.04 per unit of risk. If you would invest  29.00  in PT Bank Mandiri on October 10, 2024 and sell it today you would earn a total of  5.00  from holding PT Bank Mandiri or generate 17.24% return on investment over 90 days.

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

PT Bank Mandiri  vs.  UNIVERSAL DISPLAY

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.

UNIVERSAL DISPLAY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNIVERSAL DISPLAY 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 fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PT Bank and UNIVERSAL DISPLAY

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

The idea behind PT Bank Mandiri and UNIVERSAL DISPLAY 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.