Correlation Between PT Bank and Spring Valley

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

Diversification Opportunities for PT Bank and Spring Valley

-0.12

Correlation Coefficient

PT Bank  Spring Valley

Good diversification

The 3 months correlation between BKRKF and Spring is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Spring Valley Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spring Valley Acquisition 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 Spring Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spring Valley Acquisition has no effect on the direction of PT Bank i.e., PT Bank and Spring Valley go up and down completely randomly.

Pair Corralation between PT Bank and Spring Valley

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 12.16 times more return on investment than Spring Valley. However, PT Bank is 12.16 times more volatile than Spring Valley Acquisition. It trades about 0.0 of its potential returns per unit of risk. Spring Valley Acquisition is currently generating about 0.0 per unit of risk. If you would invest  32.00  in PT Bank Rakyat on September 12, 2024 and sell it today you would lose (3.00) from holding PT Bank Rakyat or give up 9.38% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  Spring Valley Acquisition

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.

Spring Valley Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spring Valley Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Spring Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with PT Bank and Spring Valley

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

The idea behind PT Bank Rakyat and Spring Valley Acquisition 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.