Correlation Between Bank Negara and TPT Strategic

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

Diversification Opportunities for Bank Negara and TPT Strategic

-0.52

Correlation Coefficient

Bank Negara  TPT Strategic

Excellent diversification

The 3 months correlation between Bank and TPT is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and TPT Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPT Strategic 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 TPT Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPT Strategic has no effect on the direction of Bank Negara i.e., Bank Negara and TPT Strategic go up and down completely randomly.

Pair Corralation between Bank Negara and TPT Strategic

Assuming the 90 days horizon Bank Negara is expected to generate 23.91 times less return on investment than TPT Strategic. But when comparing it to its historical volatility, Bank Negara Indonesia is 5.62 times less risky than TPT Strategic. It trades about 0.03 of its potential returns per unit of risk. TPT Strategic is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  48.00  in TPT Strategic on October 7, 2024 and sell it today you would earn a total of  852.00  from holding TPT Strategic or generate 1775.0% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  TPT Strategic

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 fragile 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.

TPT Strategic

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TPT Strategic are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, TPT Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and TPT Strategic

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

The idea behind Bank Negara Indonesia and TPT Strategic 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.