Correlation Between Bank Danamon and BFI Finance

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

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

Diversification Opportunities for Bank Danamon and BFI Finance

0.58

Correlation Coefficient

Bank Danamon  BFI Finance

Very weak diversification

The 3 months correlation between Bank and BFI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bank Danamon Indonesia and BFI Finance Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFI Finance Indonesia and Bank Danamon 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 Danamon Indonesia are associated (or correlated) with BFI Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFI Finance Indonesia has no effect on the direction of Bank Danamon i.e., Bank Danamon and BFI Finance go up and down completely randomly.

Pair Corralation between Bank Danamon and BFI Finance

Assuming the 90 days trading horizon Bank Danamon is expected to generate 2.61 times less return on investment than BFI Finance. But when comparing it to its historical volatility, Bank Danamon Indonesia is 2.01 times less risky than BFI Finance. It trades about 0.01 of its potential returns per unit of risk. BFI Finance Indonesia is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  92,178  in BFI Finance Indonesia on September 14, 2024 and sell it today you would lose (678.00) from holding BFI Finance Indonesia or give up 0.74% of portfolio value over 90 days.

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

Bank Danamon Indonesia  vs.  BFI Finance Indonesia

Bank Danamon Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Danamon Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Danamon is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BFI Finance Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BFI Finance Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bank Danamon and BFI Finance

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

The idea behind Bank Danamon Indonesia and BFI Finance 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.