Correlation Between PT Bank and Seelos Therapeutics

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

Diversification Opportunities for PT Bank and Seelos Therapeutics

0.81

Correlation Coefficient

PT Bank  Seelos Therapeutics

Very poor diversification

The 3 months correlation between BKRKF and Seelos is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Seelos Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seelos Therapeutics 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 Seelos Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seelos Therapeutics has no effect on the direction of PT Bank i.e., PT Bank and Seelos Therapeutics go up and down completely randomly.

Pair Corralation between PT Bank and Seelos Therapeutics

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 0.4 times more return on investment than Seelos Therapeutics. However, PT Bank Rakyat is 2.49 times less risky than Seelos Therapeutics. It trades about -0.03 of its potential returns per unit of risk. Seelos Therapeutics is currently generating about -0.23 per unit of risk. If you would invest  32.00  in PT Bank Rakyat on September 18, 2024 and sell it today you would lose (6.00) from holding PT Bank Rakyat or give up 18.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	71.43%
Values	Daily Returns

PT Bank Rakyat  vs.  Seelos Therapeutics

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 weak 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.

Seelos Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seelos Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Bank and Seelos Therapeutics

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

The idea behind PT Bank Rakyat and Seelos Therapeutics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.