Correlation Between Bank Tabungan and Sekar Bumi

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

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

Diversification Opportunities for Bank Tabungan and Sekar Bumi

-0.42

Correlation Coefficient

Bank Tabungan  Sekar Bumi

Very good diversification

The 3 months correlation between Bank and Sekar is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bank Tabungan Pensiunan and Sekar Bumi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekar Bumi Tbk and Bank Tabungan 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 Tabungan Pensiunan are associated (or correlated) with Sekar Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekar Bumi Tbk has no effect on the direction of Bank Tabungan i.e., Bank Tabungan and Sekar Bumi go up and down completely randomly.

Pair Corralation between Bank Tabungan and Sekar Bumi

Assuming the 90 days trading horizon Bank Tabungan Pensiunan is expected to under-perform the Sekar Bumi. But the stock apears to be less risky and, when comparing its historical volatility, Bank Tabungan Pensiunan is 5.25 times less risky than Sekar Bumi. The stock trades about -0.06 of its potential returns per unit of risk. The Sekar Bumi Tbk is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  31,600  in Sekar Bumi Tbk on September 18, 2024 and sell it today you would earn a total of  27,400  from holding Sekar Bumi Tbk or generate 86.71% return on investment over 90 days.

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

Bank Tabungan Pensiunan  vs.  Sekar Bumi Tbk

Bank Tabungan Pensiunan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sekar Bumi Tbk

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sekar Bumi Tbk are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sekar Bumi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Tabungan and Sekar Bumi

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

The idea behind Bank Tabungan Pensiunan and Sekar Bumi 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.