Correlation Between Bank Negara and Engie SA

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

Diversification Opportunities for Bank Negara and Engie SA

-0.36

Correlation Coefficient

Bank Negara  Engie SA

Very good diversification

The 3 months correlation between Bank and Engie is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Engie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA 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 Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA has no effect on the direction of Bank Negara i.e., Bank Negara and Engie SA go up and down completely randomly.

Pair Corralation between Bank Negara and Engie SA

Assuming the 90 days horizon Bank Negara is expected to generate 4.78 times less return on investment than Engie SA. In addition to that, Bank Negara is 1.26 times more volatile than Engie SA. It trades about 0.02 of its total potential returns per unit of risk. Engie SA is currently generating about 0.09 per unit of volatility. If you would invest  1,558  in Engie SA on December 28, 2024 and sell it today you would earn a total of  333.00  from holding Engie SA or generate 21.37% 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.  Engie SA

Bank Negara Indonesia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Negara Indonesia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Engie SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Engie SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Engie SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Engie SA

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

The idea behind Bank Negara Indonesia and Engie SA 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.