Correlation Between Bank Negara and Shimano

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

Diversification Opportunities for Bank Negara and Shimano

0.74

Correlation Coefficient

Bank Negara  Shimano

Poor diversification

The 3 months correlation between Bank and Shimano is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc ADR 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Bank Negara i.e., Bank Negara and Shimano go up and down completely randomly.

Pair Corralation between Bank Negara and Shimano

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 2.92 times more return on investment than Shimano. However, Bank Negara is 2.92 times more volatile than Shimano Inc ADR. It trades about -0.03 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about -0.24 per unit of risk. If you would invest  1,730  in Bank Negara Indonesia on September 14, 2024 and sell it today you would lose (269.00) from holding Bank Negara Indonesia or give up 15.55% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  Shimano Inc ADR

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.

Shimano Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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.

Pair Trading with Bank Negara and Shimano

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

The idea behind Bank Negara Indonesia and Shimano Inc ADR 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.