Correlation Between PT Bank and Northrop Grumman

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

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

Diversification Opportunities for PT Bank and Northrop Grumman

-0.28

Correlation Coefficient

PT Bank  Northrop Grumman

Very good diversification

The 3 months correlation between PQ9 and Northrop is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman and PT 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 PT Bank Mandiri are associated (or correlated) with Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of PT Bank i.e., PT Bank and Northrop Grumman go up and down completely randomly.

Pair Corralation between PT Bank and Northrop Grumman

Assuming the 90 days horizon PT Bank is expected to generate 1.06 times less return on investment than Northrop Grumman. In addition to that, PT Bank is 4.77 times more volatile than Northrop Grumman. It trades about 0.03 of its total potential returns per unit of risk. Northrop Grumman is currently generating about 0.15 per unit of volatility. If you would invest  40,933  in Northrop Grumman on April 24, 2025 and sell it today you would earn a total of  6,677  from holding Northrop Grumman or generate 16.31% return on investment over 90 days.

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

PT Bank Mandiri  vs.  Northrop Grumman

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 2 (%) 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.

Northrop Grumman

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northrop Grumman are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northrop Grumman reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Northrop Grumman

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

The idea behind PT Bank Mandiri and Northrop Grumman 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .