Correlation Between Bank Negara and Metro Pacific

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

Diversification Opportunities for Bank Negara and Metro Pacific

0.0

Correlation Coefficient

Bank Negara  Metro Pacific

Pay attention - limited upside

The 3 months correlation between Bank and Metro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Metro Pacific Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Pacific Investments 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 Metro Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Pacific Investments has no effect on the direction of Bank Negara i.e., Bank Negara and Metro Pacific go up and down completely randomly.

Pair Corralation between Bank Negara and Metro Pacific

If you would invest  1,324  in Bank Negara Indonesia on December 28, 2024 and sell it today you would lose (64.00) from holding Bank Negara Indonesia or give up 4.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bank Negara Indonesia  vs.  Metro Pacific Investments

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.

Metro Pacific Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metro Pacific Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Metro Pacific is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Negara and Metro Pacific

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

The idea behind Bank Negara Indonesia and Metro Pacific Investments 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.