Correlation Between Safety Insurance and PT Bank

Can any of the company-specific risk be diversified away by investing in both Safety Insurance and PT Bank 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 Safety Insurance and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Safety Insurance Group and PT Bank Mandiri, you can compare the effects of market volatilities on Safety Insurance and PT Bank 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 Safety Insurance with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and PT Bank.

Diversification Opportunities for Safety Insurance and PT Bank

-0.73

Correlation Coefficient

Safety Insurance  PT Bank

Pay attention - limited upside

The 3 months correlation between Safety and PQ9 is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri and Safety Insurance 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 Safety Insurance Group are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Mandiri has no effect on the direction of Safety Insurance i.e., Safety Insurance and PT Bank go up and down completely randomly.

Pair Corralation between Safety Insurance and PT Bank

Assuming the 90 days horizon Safety Insurance Group is expected to generate 0.28 times more return on investment than PT Bank. However, Safety Insurance Group is 3.52 times less risky than PT Bank. It trades about 0.06 of its potential returns per unit of risk. PT Bank Mandiri is currently generating about -0.04 per unit of risk. If you would invest  7,762  in Safety Insurance Group on September 20, 2024 and sell it today you would earn a total of  138.00  from holding Safety Insurance Group or generate 1.78% return on investment over 90 days.

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

Safety Insurance Group  vs.  PT Bank Mandiri

Safety Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Safety Insurance and PT Bank

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

The idea behind Safety Insurance Group and PT Bank Mandiri 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 Transaction History module to view history of all your transactions and understand their impact on performance.