Correlation Between Bank Rakyat and Star Pacific

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

Diversification Opportunities for Bank Rakyat and Star Pacific

-0.45

Correlation Coefficient

Bank Rakyat  Star Pacific

Very good diversification

The 3 months correlation between Bank and Star is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Star Pacific Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Pacific 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 Star Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Pacific Tbk has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Star Pacific go up and down completely randomly.

Pair Corralation between Bank Rakyat and Star Pacific

Assuming the 90 days trading horizon Bank Rakyat Indonesia is expected to under-perform the Star Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Bank Rakyat Indonesia is 2.32 times less risky than Star Pacific. The stock trades about -0.19 of its potential returns per unit of risk. The Star Pacific Tbk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  24,800  in Star Pacific Tbk on September 14, 2024 and sell it today you would earn a total of  1,800  from holding Star Pacific Tbk or generate 7.26% return on investment over 90 days.

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

Bank Rakyat Indonesia  vs.  Star Pacific 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.

Star Pacific Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Star Pacific Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Star Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Rakyat and Star Pacific

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

The idea behind Bank Rakyat Indonesia and Star Pacific 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.