Correlation Between Bank Negara and Pekin Life

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

Diversification Opportunities for Bank Negara and Pekin Life

-0.69

Correlation Coefficient

Bank Negara  Pekin Life

Excellent diversification

The 3 months correlation between Bank and Pekin is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Pekin Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pekin Life Insurance 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 Pekin Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pekin Life Insurance has no effect on the direction of Bank Negara i.e., Bank Negara and Pekin Life go up and down completely randomly.

Pair Corralation between Bank Negara and Pekin Life

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Pekin Life. In addition to that, Bank Negara is 19.46 times more volatile than Pekin Life Insurance. It trades about -0.04 of its total potential returns per unit of risk. Pekin Life Insurance is currently generating about 0.13 per unit of volatility. If you would invest  1,152  in Pekin Life Insurance on September 17, 2024 and sell it today you would earn a total of  24.00  from holding Pekin Life Insurance or generate 2.08% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Pekin Life Insurance

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.

Pekin Life Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank Negara and Pekin Life

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

The idea behind Bank Negara Indonesia and Pekin Life Insurance 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.