Correlation Between Bank Negara and Southern BancShares

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

Diversification Opportunities for Bank Negara and Southern BancShares

-0.86

Correlation Coefficient

Bank Negara  Southern BancShares

Pay attention - limited upside

The 3 months correlation between Bank and Southern is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Southern BancShares NC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern BancShares has no effect on the direction of Bank Negara i.e., Bank Negara and Southern BancShares go up and down completely randomly.

Pair Corralation between Bank Negara and Southern BancShares

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Southern BancShares. In addition to that, Bank Negara is 3.36 times more volatile than Southern BancShares NC. It trades about -0.14 of its total potential returns per unit of risk. Southern BancShares NC is currently generating about 0.5 per unit of volatility. If you would invest  725,000  in Southern BancShares NC on October 1, 2024 and sell it today you would earn a total of  85,000  from holding Southern BancShares NC or generate 11.72% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Southern BancShares NC

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 unsteady 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.

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Southern BancShares

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

The idea behind Bank Negara Indonesia and Southern BancShares NC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.