Correlation Between Spring Valley and PT Bank

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

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

Diversification Opportunities for Spring Valley and PT Bank

-0.12

Correlation Coefficient

Spring Valley  PT Bank

Good diversification

The 3 months correlation between Spring and BKRKF is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Spring Valley Acquisition 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 Spring Valley 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 Spring Valley Acquisition 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 Spring Valley i.e., Spring Valley and PT Bank go up and down completely randomly.

Pair Corralation between Spring Valley and PT Bank

Given the investment horizon of 90 days Spring Valley is expected to generate 9.67 times less return on investment than PT Bank. But when comparing it to its historical volatility, Spring Valley Acquisition is 12.16 times less risky than PT Bank. It trades about 0.0 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  32.00  in PT Bank Rakyat on September 12, 2024 and sell it today you would lose (3.00) from holding PT Bank Rakyat or give up 9.38% of portfolio value over 90 days.

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

Spring Valley Acquisition  vs.  PT Bank Rakyat

Spring Valley Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spring Valley Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Spring Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Spring Valley and PT Bank

The main advantage of trading using opposite Spring Valley and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spring Valley 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 Spring Valley Acquisition 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.