Correlation Between Bank Negara and Apexindo Pratama

Can any of the company-specific risk be diversified away by investing in both Bank Negara and Apexindo Pratama 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 Apexindo Pratama 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 Apexindo Pratama Duta, you can compare the effects of market volatilities on Bank Negara and Apexindo Pratama 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 Apexindo Pratama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Apexindo Pratama.

Diversification Opportunities for Bank Negara and Apexindo Pratama

0.8

Correlation Coefficient

Bank Negara  Apexindo Pratama

Very poor diversification

The 3 months correlation between Bank and Apexindo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Apexindo Pratama Duta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apexindo Pratama Duta 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 Apexindo Pratama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apexindo Pratama Duta has no effect on the direction of Bank Negara i.e., Bank Negara and Apexindo Pratama go up and down completely randomly.

Pair Corralation between Bank Negara and Apexindo Pratama

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to generate 0.78 times more return on investment than Apexindo Pratama. However, Bank Negara Indonesia is 1.28 times less risky than Apexindo Pratama. It trades about -0.1 of its potential returns per unit of risk. Apexindo Pratama Duta is currently generating about -0.12 per unit of risk. If you would invest  535,000  in Bank Negara Indonesia on September 4, 2024 and sell it today you would lose (62,000) from holding Bank Negara Indonesia or give up 11.59% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  Apexindo Pratama Duta

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 latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Apexindo Pratama Duta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apexindo Pratama Duta 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bank Negara and Apexindo Pratama

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

The idea behind Bank Negara Indonesia and Apexindo Pratama Duta 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..