Correlation Between Standard Bank and PT Bank

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

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

Diversification Opportunities for Standard Bank and PT Bank

-0.13

Correlation Coefficient

Standard Bank  PT Bank

Good diversification

The 3 months correlation between Standard and BKRKF is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and Standard Bank 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 Standard Bank 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 Rakyat has no effect on the direction of Standard Bank i.e., Standard Bank and PT Bank go up and down completely randomly.

Pair Corralation between Standard Bank and PT Bank

Assuming the 90 days horizon Standard Bank is expected to generate 1.92 times less return on investment than PT Bank. But when comparing it to its historical volatility, Standard Bank Group is 5.09 times less risky than PT Bank. It trades about 0.1 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  23.00  in PT Bank Rakyat on December 21, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.53%
Values	Daily Returns

Standard Bank Group  vs.  PT Bank Rakyat

Standard Bank Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PT Bank Rakyat

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Standard Bank and PT Bank

The main advantage of trading using opposite Standard Bank and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank 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 Standard Bank Group and PT Bank Rakyat 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 Commodity Directory module to find actively traded commodities issued by global exchanges.