Correlation Between Bank Negara and Haier Smart

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

Diversification Opportunities for Bank Negara and Haier Smart

-0.66

Correlation Coefficient

Bank Negara  Haier Smart

Excellent diversification

The 3 months correlation between Bank and Haier is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Bank Negara i.e., Bank Negara and Haier Smart go up and down completely randomly.

Pair Corralation between Bank Negara and Haier Smart

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Haier Smart. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Negara Indonesia is 4.91 times less risky than Haier Smart. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Haier Smart Home is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Haier Smart Home on September 1, 2024 and sell it today you would earn a total of  85.00  from holding Haier Smart Home or generate 94.44% 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.  Haier Smart Home

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 fairly strong basic indicators, Bank Negara is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Haier Smart Home

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Haier Smart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Haier Smart

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

The idea behind Bank Negara Indonesia and Haier Smart Home 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.