Correlation Between US Bancorp and Bank Negara

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

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

Diversification Opportunities for US Bancorp and Bank Negara

-0.73

Correlation Coefficient

US Bancorp  Bank Negara

Pay attention - limited upside

The 3 months correlation between USB-PH and Bank is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp 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 US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and Bank Negara go up and down completely randomly.

Pair Corralation between US Bancorp and Bank Negara

Assuming the 90 days trading horizon US Bancorp is expected to generate 0.1 times more return on investment than Bank Negara. However, US Bancorp is 9.87 times less risky than Bank Negara. It trades about 0.16 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about -0.03 per unit of risk. If you would invest  2,159  in US Bancorp on September 16, 2024 and sell it today you would earn a total of  116.00  from holding US Bancorp or generate 5.37% return on investment over 90 days.

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

US Bancorp  vs.  Bank Negara Indonesia

US Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with US Bancorp and Bank Negara

The main advantage of trading using opposite US Bancorp and Bank Negara positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US Bancorp 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.