Correlation Between PT Bank and Carsales

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

By analyzing existing cross correlation between PT Bank Maybank and Carsales, you can compare the effects of market volatilities on PT Bank and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Carsales.

Diversification Opportunities for PT Bank and Carsales

-0.43

Correlation Coefficient

PT Bank  Carsales

Very good diversification

The 3 months correlation between BOZA and Carsales is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Maybank are associated (or correlated) with Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of PT Bank i.e., PT Bank and Carsales go up and down completely randomly.

Pair Corralation between PT Bank and Carsales

Assuming the 90 days trading horizon PT Bank Maybank is expected to generate 2.36 times more return on investment than Carsales. However, PT Bank is 2.36 times more volatile than Carsales. It trades about 0.07 of its potential returns per unit of risk. Carsales is currently generating about -0.15 per unit of risk. If you would invest  1.20  in PT Bank Maybank on September 13, 2024 and sell it today you would earn a total of  0.05  from holding PT Bank Maybank or generate 4.17% return on investment over 90 days.

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

PT Bank Maybank  vs.  Carsales

PT Bank Maybank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bank Maybank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Carsales

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carsales are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carsales may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and Carsales

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

The idea behind PT Bank Maybank and Carsales 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.