Correlation Between Semen Indonesia and Bank Negara

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

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

Diversification Opportunities for Semen Indonesia and Bank Negara

0.67

Correlation Coefficient

Semen Indonesia  Bank Negara

Poor diversification

The 3 months correlation between Semen and Bank is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia and Semen Indonesia 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 Semen Indonesia Persero are associated (or correlated) with Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of Semen Indonesia i.e., Semen Indonesia and Bank Negara go up and down completely randomly.

Pair Corralation between Semen Indonesia and Bank Negara

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to under-perform the Bank Negara. In addition to that, Semen Indonesia is 1.33 times more volatile than Bank Negara Indonesia. It trades about -0.09 of its total potential returns per unit of risk. Bank Negara Indonesia is currently generating about -0.06 per unit of volatility. If you would invest  537,500  in Bank Negara Indonesia on September 3, 2024 and sell it today you would lose (39,500) from holding Bank Negara Indonesia or give up 7.35% of portfolio value over 90 days.

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

Semen Indonesia Persero  vs.  Bank Negara Indonesia

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Semen Indonesia and Bank Negara

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

The idea behind Semen Indonesia Persero and Bank Negara Indonesia 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.