Correlation Between PT Bank and Banco Do

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

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

Diversification Opportunities for PT Bank and Banco Do

0.77

Correlation Coefficient

PT Bank  Banco Do

Poor diversification

The 3 months correlation between BKRKF and Banco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil and PT Bank 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 PT Bank Rakyat are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Do Brasil has no effect on the direction of PT Bank i.e., PT Bank and Banco Do go up and down completely randomly.

Pair Corralation between PT Bank and Banco Do

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 2.91 times more return on investment than Banco Do. However, PT Bank is 2.91 times more volatile than Banco Do Brasil. It trades about 0.06 of its potential returns per unit of risk. Banco Do Brasil is currently generating about -0.15 per unit of risk. If you would invest  28.00  in PT Bank Rakyat on September 12, 2024 and sell it today you would earn a total of  1.00  from holding PT Bank Rakyat or generate 3.57% return on investment over 90 days.

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

PT Bank Rakyat  vs.  Banco Do Brasil

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Banco Do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PT Bank and Banco Do

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

The idea behind PT Bank Rakyat and Banco Do Brasil 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.