Correlation Between Transportadora and PT Bank

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

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

Diversification Opportunities for Transportadora and PT Bank

-0.87

Correlation Coefficient

Transportadora  PT Bank

Pay attention - limited upside

The 3 months correlation between Transportadora and BYRA is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas 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 Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and PT Bank go up and down completely randomly.

Pair Corralation between Transportadora and PT Bank

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 0.7 times more return on investment than PT Bank. However, Transportadora de Gas is 1.43 times less risky than PT Bank. It trades about 0.03 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.03 per unit of risk. If you would invest  2,680  in Transportadora de Gas on October 2, 2024 and sell it today you would earn a total of  20.00  from holding Transportadora de Gas or generate 0.75% return on investment over 90 days.

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

Transportadora de Gas  vs.  PT Bank Rakyat

Transportadora de Gas

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

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 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 Transportadora and PT Bank

The main advantage of trading using opposite Transportadora and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.