Correlation Between PT Bank and Franchise

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

Diversification Opportunities for PT Bank and Franchise

-0.68

Correlation Coefficient

PT Bank  Franchise

Excellent diversification

The 3 months correlation between BKRKF and Franchise is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group 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 Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of PT Bank i.e., PT Bank and Franchise go up and down completely randomly.

Pair Corralation between PT Bank and Franchise

Assuming the 90 days horizon PT Bank is expected to generate 1.03 times less return on investment than Franchise. In addition to that, PT Bank is 2.61 times more volatile than Franchise Group. It trades about 0.03 of its total potential returns per unit of risk. Franchise Group is currently generating about 0.08 per unit of volatility. If you would invest  2,020  in Franchise Group on September 14, 2024 and sell it today you would earn a total of  473.00  from holding Franchise Group or generate 23.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	35.64%
Values	Daily Returns

PT Bank Rakyat  vs.  Franchise Group

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 latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PT Bank and Franchise

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

The idea behind PT Bank Rakyat and Franchise Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.