Correlation Between Bank Rakyat and Delta Djakarta

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

Diversification Opportunities for Bank Rakyat and Delta Djakarta

0.87

Correlation Coefficient

Bank Rakyat  Delta Djakarta

Very poor diversification

The 3 months correlation between Bank and Delta is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Delta Djakarta Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Djakarta Tbk 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 Delta Djakarta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Djakarta Tbk has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Delta Djakarta go up and down completely randomly.

Pair Corralation between Bank Rakyat and Delta Djakarta

Assuming the 90 days trading horizon Bank Rakyat Indonesia is expected to generate 1.06 times more return on investment than Delta Djakarta. However, Bank Rakyat is 1.06 times more volatile than Delta Djakarta Tbk. It trades about -0.15 of its potential returns per unit of risk. Delta Djakarta Tbk is currently generating about -0.16 per unit of risk. If you would invest  478,701  in Bank Rakyat Indonesia on September 30, 2024 and sell it today you would lose (68,701) from holding Bank Rakyat Indonesia or give up 14.35% of portfolio value over 90 days.

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

Bank Rakyat Indonesia  vs.  Delta Djakarta Tbk

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.

Delta Djakarta Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delta Djakarta Tbk 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 Rakyat and Delta Djakarta

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

The idea behind Bank Rakyat Indonesia and Delta Djakarta Tbk 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.