Correlation Between Bank Negara and Sofina Société

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

Diversification Opportunities for Bank Negara and Sofina Société

0.69

Correlation Coefficient

Bank Negara  Sofina Société

Poor diversification

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

Pair Corralation between Bank Negara and Sofina Société

If you would invest  23,000  in Sofina Socit Anonyme on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Sofina Socit Anonyme or generate 0.0% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Sofina Socit Anonyme

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 unsteady 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.

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofina Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sofina Société is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Negara and Sofina Société

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

The idea behind Bank Negara Indonesia and Sofina Socit Anonyme 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.