Correlation Between Bank Negara and PT Cerestar

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

Diversification Opportunities for Bank Negara and PT Cerestar

-0.65

Correlation Coefficient

Bank Negara  PT Cerestar

Excellent diversification

The 3 months correlation between Bank and TRGU is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and PT Cerestar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Cerestar Indonesia 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 PT Cerestar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Cerestar Indonesia has no effect on the direction of Bank Negara i.e., Bank Negara and PT Cerestar go up and down completely randomly.

Pair Corralation between Bank Negara and PT Cerestar

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the PT Cerestar. In addition to that, Bank Negara is 1.94 times more volatile than PT Cerestar Indonesia. It trades about -0.13 of its total potential returns per unit of risk. PT Cerestar Indonesia is currently generating about 0.06 per unit of volatility. If you would invest  19,700  in PT Cerestar Indonesia on September 15, 2024 and sell it today you would earn a total of  700.00  from holding PT Cerestar Indonesia or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Bank Negara Indonesia  vs.  PT Cerestar Indonesia

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.

PT Cerestar Indonesia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Cerestar Indonesia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Cerestar is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Negara and PT Cerestar

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

The idea behind Bank Negara Indonesia and PT Cerestar Indonesia 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..