Correlation Between Bank Negara and Panca Budi

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

Diversification Opportunities for Bank Negara and Panca Budi

-0.82

Correlation Coefficient

Bank Negara  Panca Budi

Pay attention - limited upside

The 3 months correlation between Bank and Panca is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Panca Budi Idaman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panca Budi Idaman 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 Panca Budi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panca Budi Idaman has no effect on the direction of Bank Negara i.e., Bank Negara and Panca Budi go up and down completely randomly.

Pair Corralation between Bank Negara and Panca Budi

Assuming the 90 days trading horizon Bank Negara is expected to generate 13.0 times less return on investment than Panca Budi. But when comparing it to its historical volatility, Bank Negara Indonesia is 7.98 times less risky than Panca Budi. It trades about 0.03 of its potential returns per unit of risk. Panca Budi Idaman is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  33,530  in Panca Budi Idaman on September 16, 2024 and sell it today you would earn a total of  21,470  from holding Panca Budi Idaman or generate 64.03% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Panca Budi Idaman

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 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.

Panca Budi Idaman

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Panca Budi Idaman are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Panca Budi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Panca Budi

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

The idea behind Bank Negara Indonesia and Panca Budi Idaman 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 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..