Correlation Between PT Bank and First American

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

Diversification Opportunities for PT Bank and First American

-0.64

Correlation Coefficient

PT Bank  First American

Excellent diversification

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

Pair Corralation between PT Bank and First American

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the First American. In addition to that, PT Bank is 4.76 times more volatile than First American Financial. It trades about -0.02 of its total potential returns per unit of risk. First American Financial is currently generating about 0.13 per unit of volatility. If you would invest  5,949  in First American Financial on September 16, 2024 and sell it today you would earn a total of  201.00  from holding First American Financial or generate 3.38% 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.  First American 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 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.

First American Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First American Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and First American

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

The idea behind PT Bank Mandiri and First American 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.