Correlation Between PT Bank and Summit Bancshares

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

Diversification Opportunities for PT Bank and Summit Bancshares

-0.49

Correlation Coefficient

PT Bank  Summit Bancshares

Very good diversification

The 3 months correlation between BKRKF and Summit is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares 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 Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of PT Bank i.e., PT Bank and Summit Bancshares go up and down completely randomly.

Pair Corralation between PT Bank and Summit Bancshares

Assuming the 90 days horizon PT Bank is expected to generate 1.67 times less return on investment than Summit Bancshares. In addition to that, PT Bank is 5.18 times more volatile than Summit Bancshares. It trades about 0.0 of its total potential returns per unit of risk. Summit Bancshares is currently generating about 0.02 per unit of volatility. If you would invest  4,346  in Summit Bancshares on September 13, 2024 and sell it today you would earn a total of  35.00  from holding Summit Bancshares or generate 0.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

PT Bank Rakyat  vs.  Summit Bancshares

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.

Summit Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Summit Bancshares is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PT Bank and Summit Bancshares

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

The idea behind PT Bank Rakyat and Summit Bancshares 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.