Correlation Between Bank Qnb and Archi Indonesia

Can any of the company-specific risk be diversified away by investing in both Bank Qnb and Archi Indonesia 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 Bank Qnb and Archi Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Qnb Indonesia and Archi Indonesia Tbk, you can compare the effects of market volatilities on Bank Qnb and Archi Indonesia 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 Bank Qnb with a short position of Archi Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Qnb and Archi Indonesia.

Diversification Opportunities for Bank Qnb and Archi Indonesia

-0.53

Correlation Coefficient

Bank Qnb  Archi Indonesia

Excellent diversification

The 3 months correlation between Bank and Archi is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank Qnb Indonesia and Archi Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archi Indonesia Tbk and Bank Qnb 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 Bank Qnb Indonesia are associated (or correlated) with Archi Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archi Indonesia Tbk has no effect on the direction of Bank Qnb i.e., Bank Qnb and Archi Indonesia go up and down completely randomly.

Pair Corralation between Bank Qnb and Archi Indonesia

Assuming the 90 days trading horizon Bank Qnb Indonesia is expected to generate 2.98 times more return on investment than Archi Indonesia. However, Bank Qnb is 2.98 times more volatile than Archi Indonesia Tbk. It trades about 0.09 of its potential returns per unit of risk. Archi Indonesia Tbk is currently generating about -0.05 per unit of risk. If you would invest  6,200  in Bank Qnb Indonesia on September 16, 2024 and sell it today you would earn a total of  1,600  from holding Bank Qnb Indonesia or generate 25.81% return on investment over 90 days.

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

Bank Qnb Indonesia  vs.  Archi Indonesia Tbk

Bank Qnb Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Qnb Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Qnb disclosed solid returns over the last few months and may actually be approaching a breakup point.

Archi Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archi Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Archi Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Qnb and Archi Indonesia

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

The idea behind Bank Qnb Indonesia and Archi Indonesia Tbk 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.