Correlation Between Bank Negara and Argo Group

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

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

Diversification Opportunities for Bank Negara and Argo Group

-0.8

Correlation Coefficient

Bank Negara  Argo Group

Pay attention - limited upside

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

Pair Corralation between Bank Negara and Argo Group

If you would invest  1,657  in Bank Negara Indonesia on September 13, 2024 and sell it today you would lose (66.00) from holding Bank Negara Indonesia or give up 3.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	0.4%
Values	Daily Returns

Bank Negara Indonesia  vs.  Argo Group International

Bank Negara Indonesia

Risk-Adjusted Performance

0 of 100

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.

Argo Group International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argo Group International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Argo Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank Negara and Argo Group

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

The idea behind Bank Negara Indonesia and Argo Group International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.