Correlation Between Bank Negara and Dye Durham

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

Diversification Opportunities for Bank Negara and Dye Durham

-0.32

Correlation Coefficient

Bank Negara  Dye Durham

Very good diversification

The 3 months correlation between Bank and Dye is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Dye Durham Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dye Durham Limited 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 Dye Durham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dye Durham Limited has no effect on the direction of Bank Negara i.e., Bank Negara and Dye Durham go up and down completely randomly.

Pair Corralation between Bank Negara and Dye Durham

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Dye Durham. In addition to that, Bank Negara is 1.09 times more volatile than Dye Durham Limited. It trades about -0.02 of its total potential returns per unit of risk. Dye Durham Limited is currently generating about 0.04 per unit of volatility. If you would invest  1,142  in Dye Durham Limited on October 6, 2024 and sell it today you would earn a total of  75.00  from holding Dye Durham Limited or generate 6.57% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Dye Durham Limited

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dye Durham Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dye Durham Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Dye Durham reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Dye Durham

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

The idea behind Bank Negara Indonesia and Dye Durham Limited 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.