Correlation Between Bank Negara and PT Sarimelati

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

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

Diversification Opportunities for Bank Negara and PT Sarimelati

0.05

Correlation Coefficient

Bank Negara  PT Sarimelati

Significant diversification

The 3 months correlation between Bank and PZZA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and PT Sarimelati Kencana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Sarimelati Kencana and Bank Negara 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 Bank Negara Indonesia are associated (or correlated) with PT Sarimelati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Sarimelati Kencana has no effect on the direction of Bank Negara i.e., Bank Negara and PT Sarimelati go up and down completely randomly.

Pair Corralation between Bank Negara and PT Sarimelati

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the PT Sarimelati. In addition to that, Bank Negara is 1.22 times more volatile than PT Sarimelati Kencana. It trades about -0.24 of its total potential returns per unit of risk. PT Sarimelati Kencana is currently generating about -0.23 per unit of volatility. If you would invest  28,000  in PT Sarimelati Kencana on February 5, 2024 and sell it today you would lose (2,000) from holding PT Sarimelati Kencana or give up 7.14% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  PT Sarimelati Kencana

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PT Sarimelati Kencana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Sarimelati Kencana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bank Negara and PT Sarimelati

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

The idea behind Bank Negara Indonesia and PT Sarimelati Kencana 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.