Correlation Between CHINA BANK and PT Bank

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

By analyzing existing cross correlation between CHINA BANK ADR20 and PT Bank Mandiri, you can compare the effects of market volatilities on CHINA BANK 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 CHINA BANK with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA BANK and PT Bank.

Diversification Opportunities for CHINA BANK and PT Bank

-0.4

Correlation Coefficient

CHINA BANK  PT Bank

Very good diversification

The 3 months correlation between CHINA and PQ9 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CHINA BANK ADR20 and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri and CHINA BANK 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 CHINA BANK ADR20 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 Mandiri has no effect on the direction of CHINA BANK i.e., CHINA BANK and PT Bank go up and down completely randomly.

Pair Corralation between CHINA BANK and PT Bank

Assuming the 90 days trading horizon CHINA BANK is expected to generate 1.26 times less return on investment than PT Bank. But when comparing it to its historical volatility, CHINA BANK ADR20 is 3.96 times less risky than PT Bank. It trades about 0.17 of its potential returns per unit of risk. PT Bank Mandiri is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  24.00  in PT Bank Mandiri on April 24, 2025 and sell it today you would earn a total of  2.00  from holding PT Bank Mandiri or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

CHINA BANK ADR20  vs.  PT Bank Mandiri

CHINA BANK ADR20

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA BANK ADR20 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CHINA BANK reported solid returns over the last few months and may actually be approaching a breakup point.

PT Bank Mandiri

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Mandiri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PT Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA BANK and PT Bank

The main advantage of trading using opposite CHINA BANK and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA BANK 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 CHINA BANK ADR20 and PT Bank Mandiri 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.