Correlation Between PT Bank and Fairfax India

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

Diversification Opportunities for PT Bank and Fairfax India

-0.51

Correlation Coefficient

PT Bank  Fairfax India

Excellent diversification

The 3 months correlation between BKRKF and Fairfax is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Fairfax India Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax India Holdings 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 Fairfax India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax India Holdings has no effect on the direction of PT Bank i.e., PT Bank and Fairfax India go up and down completely randomly.

Pair Corralation between PT Bank and Fairfax India

Assuming the 90 days horizon PT Bank is expected to generate 11.93 times less return on investment than Fairfax India. In addition to that, PT Bank is 4.81 times more volatile than Fairfax India Holdings. It trades about 0.0 of its total potential returns per unit of risk. Fairfax India Holdings is currently generating about 0.11 per unit of volatility. If you would invest  1,465  in Fairfax India Holdings on September 12, 2024 and sell it today you would earn a total of  128.00  from holding Fairfax India Holdings or generate 8.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

PT Bank Rakyat  vs.  Fairfax India Holdings

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.

Fairfax India Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax India Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Fairfax India may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and Fairfax India

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

The idea behind PT Bank Rakyat and Fairfax India Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.