Correlation Between Bank Danamon and Bank Tabungan

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

Diversification Opportunities for Bank Danamon and Bank Tabungan

0.73

Correlation Coefficient

Bank Danamon  Bank Tabungan

Poor diversification

The 3 months correlation between Bank and Bank is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bank Danamon Indonesia and Bank Tabungan Pensiunan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Tabungan Pensiunan 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 Bank Tabungan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Tabungan Pensiunan has no effect on the direction of Bank Danamon i.e., Bank Danamon and Bank Tabungan go up and down completely randomly.

Pair Corralation between Bank Danamon and Bank Tabungan

Assuming the 90 days trading horizon Bank Danamon Indonesia is expected to generate 0.55 times more return on investment than Bank Tabungan. However, Bank Danamon Indonesia is 1.83 times less risky than Bank Tabungan. It trades about -0.03 of its potential returns per unit of risk. Bank Tabungan Pensiunan is currently generating about -0.06 per unit of risk. If you would invest  264,000  in Bank Danamon Indonesia on September 18, 2024 and sell it today you would lose (4,000) from holding Bank Danamon Indonesia or give up 1.52% of portfolio value over 90 days.

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

Bank Danamon Indonesia  vs.  Bank Tabungan Pensiunan

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.

Bank Tabungan Pensiunan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Tabungan Pensiunan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bank Tabungan 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 Danamon and Bank Tabungan

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

The idea behind Bank Danamon Indonesia and Bank Tabungan Pensiunan 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.