Correlation Between Bank Central and Bintang Samudera

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

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

Diversification Opportunities for Bank Central and Bintang Samudera

-0.04

Correlation Coefficient

Bank Central  Bintang Samudera

Good diversification

The 3 months correlation between Bank and Bintang is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Bintang Samudera Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bintang Samudera Mandiri and Bank Central 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 Central Asia are associated (or correlated) with Bintang Samudera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bintang Samudera Mandiri has no effect on the direction of Bank Central i.e., Bank Central and Bintang Samudera go up and down completely randomly.

Pair Corralation between Bank Central and Bintang Samudera

Assuming the 90 days trading horizon Bank Central Asia is expected to generate 0.27 times more return on investment than Bintang Samudera. However, Bank Central Asia is 3.74 times less risky than Bintang Samudera. It trades about 0.04 of its potential returns per unit of risk. Bintang Samudera Mandiri is currently generating about -0.02 per unit of risk. If you would invest  813,798  in Bank Central Asia on September 14, 2024 and sell it today you would earn a total of  211,202  from holding Bank Central Asia or generate 25.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Bank Central Asia  vs.  Bintang Samudera Mandiri

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Central Asia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Central is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bintang Samudera Mandiri

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bintang Samudera Mandiri are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bintang Samudera disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Central and Bintang Samudera

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

The idea behind Bank Central Asia and Bintang Samudera 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.