Correlation Between PSB Holdings and Bank Negara

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

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

Diversification Opportunities for PSB Holdings and Bank Negara

0.23

Correlation Coefficient

PSB Holdings  Bank Negara

Modest diversification

The 3 months correlation between PSB and Bank is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding PSB Holdings 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 PSB Holdings 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 PSB Holdings 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 PSB Holdings i.e., PSB Holdings and Bank Negara go up and down completely randomly.

Pair Corralation between PSB Holdings and Bank Negara

Given the investment horizon of 90 days PSB Holdings is expected to generate 83.83 times less return on investment than Bank Negara. But when comparing it to its historical volatility, PSB Holdings is 9.48 times less risky than Bank Negara. It trades about 0.0 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,359  in Bank Negara Indonesia on December 19, 2024 and sell it today you would lose (94.00) from holding Bank Negara Indonesia or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

PSB Holdings  vs.  Bank Negara Indonesia

PSB Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days PSB Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, PSB Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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. In spite of fairly strong basic indicators, Bank Negara is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PSB Holdings and Bank Negara

The main advantage of trading using opposite PSB Holdings and Bank Negara positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSB Holdings 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 PSB Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.