Correlation Between Bank Negara and LF Capital

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

Diversification Opportunities for Bank Negara and LF Capital

-0.89

Correlation Coefficient

Bank Negara  LF Capital

Pay attention - limited upside

The 3 months correlation between Bank and LFAC is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and LF Capital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LF Capital Acquisition 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 LF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LF Capital Acquisition has no effect on the direction of Bank Negara i.e., Bank Negara and LF Capital go up and down completely randomly.

Pair Corralation between Bank Negara and LF Capital

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 30.85 times more return on investment than LF Capital. However, Bank Negara is 30.85 times more volatile than LF Capital Acquisition. It trades about 0.03 of its potential returns per unit of risk. LF Capital Acquisition is currently generating about 0.18 per unit of risk. If you would invest  1,444  in Bank Negara Indonesia on October 7, 2024 and sell it today you would earn a total of  43.00  from holding Bank Negara Indonesia or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	26.21%
Values	Daily Returns

Bank Negara Indonesia  vs.  LF Capital Acquisition

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 weak 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.

LF Capital Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LF Capital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LF Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank Negara and LF Capital

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

The idea behind Bank Negara Indonesia and LF Capital Acquisition 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.