Correlation Between Total Bangun and Bank Dinar

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

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

Diversification Opportunities for Total Bangun and Bank Dinar

0.83

Correlation Coefficient

Total Bangun  Bank Dinar

Very poor diversification

The 3 months correlation between Total and Bank is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Total Bangun Persada and Bank Dinar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Dinar Indonesia and Total Bangun 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 Total Bangun Persada are associated (or correlated) with Bank Dinar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Dinar Indonesia has no effect on the direction of Total Bangun i.e., Total Bangun and Bank Dinar go up and down completely randomly.

Pair Corralation between Total Bangun and Bank Dinar

Assuming the 90 days trading horizon Total Bangun Persada is expected to generate 0.45 times more return on investment than Bank Dinar. However, Total Bangun Persada is 2.24 times less risky than Bank Dinar. It trades about -0.11 of its potential returns per unit of risk. Bank Dinar Indonesia is currently generating about -0.23 per unit of risk. If you would invest  70,500  in Total Bangun Persada on September 27, 2024 and sell it today you would lose (3,000) from holding Total Bangun Persada or give up 4.26% of portfolio value over 90 days.

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

Total Bangun Persada  vs.  Bank Dinar Indonesia

Total Bangun Persada

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Total Bangun Persada are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Total Bangun disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Dinar Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Dinar Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Dinar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Total Bangun and Bank Dinar

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

The idea behind Total Bangun Persada and Bank Dinar 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.