Correlation Between Bank Negara and ShaMaran Petroleum

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

Diversification Opportunities for Bank Negara and ShaMaran Petroleum

-0.53

Correlation Coefficient

Bank Negara  ShaMaran Petroleum

Excellent diversification

The 3 months correlation between Bank and ShaMaran is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and ShaMaran Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ShaMaran Petroleum Corp 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 ShaMaran Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ShaMaran Petroleum Corp has no effect on the direction of Bank Negara i.e., Bank Negara and ShaMaran Petroleum go up and down completely randomly.

Pair Corralation between Bank Negara and ShaMaran Petroleum

Assuming the 90 days horizon Bank Negara is expected to generate 19.21 times less return on investment than ShaMaran Petroleum. But when comparing it to its historical volatility, Bank Negara Indonesia is 1.05 times less risky than ShaMaran Petroleum. It trades about 0.01 of its potential returns per unit of risk. ShaMaran Petroleum Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  8.00  in ShaMaran Petroleum Corp on December 29, 2024 and sell it today you would earn a total of  9.00  from holding ShaMaran Petroleum Corp or generate 112.5% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  ShaMaran Petroleum Corp

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 current stock price disturbance, may contribute to short-term losses for the investors.

ShaMaran Petroleum Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ShaMaran Petroleum Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ShaMaran Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and ShaMaran Petroleum

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

The idea behind Bank Negara Indonesia and ShaMaran Petroleum Corp 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.