Correlation Between Bank Rakyat and Austindo Nusantara

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

By analyzing existing cross correlation between Bank Rakyat Indonesia and Austindo Nusantara Jaya, you can compare the effects of market volatilities on Bank Rakyat and Austindo Nusantara 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 Rakyat with a short position of Austindo Nusantara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Rakyat and Austindo Nusantara.

Diversification Opportunities for Bank Rakyat and Austindo Nusantara

-0.74

Correlation Coefficient

Bank Rakyat  Austindo Nusantara

Pay attention - limited upside

The 3 months correlation between Bank and Austindo is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Austindo Nusantara Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austindo Nusantara Jaya and Bank Rakyat 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 Rakyat Indonesia are associated (or correlated) with Austindo Nusantara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austindo Nusantara Jaya has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Austindo Nusantara go up and down completely randomly.

Pair Corralation between Bank Rakyat and Austindo Nusantara

Assuming the 90 days trading horizon Bank Rakyat Indonesia is expected to under-perform the Austindo Nusantara. In addition to that, Bank Rakyat is 1.35 times more volatile than Austindo Nusantara Jaya. It trades about -0.2 of its total potential returns per unit of risk. Austindo Nusantara Jaya is currently generating about 0.1 per unit of volatility. If you would invest  68,000  in Austindo Nusantara Jaya on September 3, 2024 and sell it today you would earn a total of  5,000  from holding Austindo Nusantara Jaya or generate 7.35% return on investment over 90 days.

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

Bank Rakyat Indonesia  vs.  Austindo Nusantara Jaya

Bank Rakyat Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Rakyat 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.

Austindo Nusantara Jaya

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Rakyat and Austindo Nusantara

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

The idea behind Bank Rakyat Indonesia and Austindo Nusantara Jaya 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.