Correlation Between J Resources and Bank Negara

Can any of the company-specific risk be diversified away by investing in both J Resources and Bank Negara 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 J Resources and Bank Negara into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between J Resources Asia and Bank Negara Indonesia, you can compare the effects of market volatilities on J Resources and Bank Negara 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 J Resources with a short position of Bank Negara. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Resources and Bank Negara.

Diversification Opportunities for J Resources and Bank Negara

-0.26

Correlation Coefficient

J Resources  Bank Negara

Very good diversification

The 3 months correlation between PSAB and Bank is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding J Resources Asia and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia and J Resources 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 J Resources Asia are associated (or correlated) with Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of J Resources i.e., J Resources and Bank Negara go up and down completely randomly.

Pair Corralation between J Resources and Bank Negara

Assuming the 90 days trading horizon J Resources Asia is expected to generate 1.8 times more return on investment than Bank Negara. However, J Resources is 1.8 times more volatile than Bank Negara Indonesia. It trades about 0.05 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about 0.0 per unit of risk. If you would invest  23,400  in J Resources Asia on December 29, 2024 and sell it today you would earn a total of  2,000  from holding J Resources Asia or generate 8.55% return on investment over 90 days.

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

J Resources Asia  vs.  Bank Negara Indonesia

J Resources Asia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in J Resources Asia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, J Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Negara Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Negara Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Negara is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with J Resources and Bank Negara

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

The idea behind J Resources Asia and Bank Negara Indonesia 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.