Correlation Between Bank Negara and Else Nutrition

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

Diversification Opportunities for Bank Negara and Else Nutrition

0.72

Correlation Coefficient

Bank Negara  Else Nutrition

Poor diversification

The 3 months correlation between Bank and Else is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Else Nutrition Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Else Nutrition Holdings 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 Else Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Else Nutrition Holdings has no effect on the direction of Bank Negara i.e., Bank Negara and Else Nutrition go up and down completely randomly.

Pair Corralation between Bank Negara and Else Nutrition

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Else Nutrition. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Negara Indonesia is 4.22 times less risky than Else Nutrition. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Else Nutrition Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2.40  in Else Nutrition Holdings on September 30, 2024 and sell it today you would lose (1.20) from holding Else Nutrition Holdings or give up 50.0% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  Else Nutrition Holdings

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Else Nutrition Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Else Nutrition Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Else Nutrition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Negara and Else Nutrition

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

The idea behind Bank Negara Indonesia and Else Nutrition Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.