Correlation Between PT Bank and Sumitomo Mitsui

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

Diversification Opportunities for PT Bank and Sumitomo Mitsui

-0.65

Correlation Coefficient

PT Bank  Sumitomo Mitsui

Excellent diversification

The 3 months correlation between PQ9 and Sumitomo is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of PT Bank i.e., PT Bank and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between PT Bank and Sumitomo Mitsui

Assuming the 90 days horizon PT Bank Mandiri is expected to generate 2.11 times more return on investment than Sumitomo Mitsui. However, PT Bank is 2.11 times more volatile than Sumitomo Mitsui Financial. It trades about 0.03 of its potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.06 per unit of risk. If you would invest  27.00  in PT Bank Mandiri on October 7, 2024 and sell it today you would earn a total of  7.00  from holding PT Bank Mandiri or generate 25.93% 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.  Sumitomo Mitsui Financial

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

Sumitomo Mitsui Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Mitsui reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Sumitomo Mitsui

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

The idea behind PT Bank Mandiri and Sumitomo Mitsui Financial 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.