Correlation Between Bank Negara and Boralex

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

Diversification Opportunities for Bank Negara and Boralex

0.83

Correlation Coefficient

Bank Negara  Boralex

Very poor diversification

The 3 months correlation between Bank and Boralex is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex 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 Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Bank Negara i.e., Bank Negara and Boralex go up and down completely randomly.

Pair Corralation between Bank Negara and Boralex

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 2.34 times more return on investment than Boralex. However, Bank Negara is 2.34 times more volatile than Boralex. It trades about -0.03 of its potential returns per unit of risk. Boralex is currently generating about -0.14 per unit of risk. If you would invest  1,550  in Bank Negara Indonesia on October 22, 2024 and sell it today you would lose (160.00) from holding Bank Negara Indonesia or give up 10.32% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  Boralex

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bank Negara and Boralex

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

The idea behind Bank Negara Indonesia and Boralex 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.