Correlation Between Bank Negara and JD Bancshares

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

Diversification Opportunities for Bank Negara and JD Bancshares

-0.77

Correlation Coefficient

Bank Negara  JD Bancshares

Pay attention - limited upside

The 3 months correlation between Bank and JDVB is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and JD Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Bancshares 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 JD Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Bancshares has no effect on the direction of Bank Negara i.e., Bank Negara and JD Bancshares go up and down completely randomly.

Pair Corralation between Bank Negara and JD Bancshares

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the JD Bancshares. In addition to that, Bank Negara is 4.74 times more volatile than JD Bancshares. It trades about -0.17 of its total potential returns per unit of risk. JD Bancshares is currently generating about 0.2 per unit of volatility. If you would invest  2,350  in JD Bancshares on September 19, 2024 and sell it today you would earn a total of  99.00  from holding JD Bancshares or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Bank Negara Indonesia  vs.  JD Bancshares

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 weak 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.

JD Bancshares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Bancshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JD Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Negara and JD Bancshares

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

The idea behind Bank Negara Indonesia and JD Bancshares 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.