Correlation Between Neinor Homes and PT Bank

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Can any of the company-specific risk be diversified away by investing in both Neinor Homes 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 Neinor Homes and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neinor Homes SA and PT Bank Rakyat, you can compare the effects of market volatilities on Neinor Homes 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 Neinor Homes with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and PT Bank.

Diversification Opportunities for Neinor Homes and PT Bank

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Neinor and BYRA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SA and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and Neinor Homes 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 Neinor Homes SA 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 Rakyat has no effect on the direction of Neinor Homes i.e., Neinor Homes and PT Bank go up and down completely randomly.

Pair Corralation between Neinor Homes and PT Bank

Assuming the 90 days trading horizon Neinor Homes is expected to generate 2.17 times less return on investment than PT Bank. But when comparing it to its historical volatility, Neinor Homes SA is 3.37 times less risky than PT Bank. It trades about 0.09 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  27.00  in PT Bank Rakyat on September 11, 2024 and sell it today you would earn a total of  1.00  from holding PT Bank Rakyat or generate 3.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Neinor Homes SA  vs.  PT Bank Rakyat

 Performance 
       Timeline  
Neinor Homes SA 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Neinor Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.
PT Bank Rakyat 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Rakyat are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Neinor Homes and PT Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Neinor Homes and PT Bank

The main advantage of trading using opposite Neinor Homes and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neinor Homes 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 Neinor Homes SA and PT Bank Rakyat 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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