Correlation Between Bank Victoria and Indonesia Fibreboard

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

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

Diversification Opportunities for Bank Victoria and Indonesia Fibreboard

0.42

Correlation Coefficient

Bank Victoria  Indonesia Fibreboard

Very weak diversification

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

Pair Corralation between Bank Victoria and Indonesia Fibreboard

Assuming the 90 days trading horizon Bank Victoria is expected to generate 1.66 times less return on investment than Indonesia Fibreboard. In addition to that, Bank Victoria is 1.38 times more volatile than Indonesia Fibreboard Industry. It trades about 0.03 of its total potential returns per unit of risk. Indonesia Fibreboard Industry is currently generating about 0.06 per unit of volatility. If you would invest  18,534  in Indonesia Fibreboard Industry on September 23, 2024 and sell it today you would earn a total of  1,466  from holding Indonesia Fibreboard Industry or generate 7.91% return on investment over 90 days.

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

Bank Victoria International  vs.  Indonesia Fibreboard Industry

Bank Victoria Intern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Victoria International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bank Victoria is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Indonesia Fibreboard

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Fibreboard Industry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indonesia Fibreboard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Victoria and Indonesia Fibreboard

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

The idea behind Bank Victoria International and Indonesia Fibreboard Industry 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.