Correlation Between PT Bank and AerCap Holdings

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

Diversification Opportunities for PT Bank and AerCap Holdings

-0.65

Correlation Coefficient

PT Bank  AerCap Holdings

Excellent diversification

The 3 months correlation between BYRA and AerCap is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV 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 AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of PT Bank i.e., PT Bank and AerCap Holdings go up and down completely randomly.

Pair Corralation between PT Bank and AerCap Holdings

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the AerCap Holdings. In addition to that, PT Bank is 3.3 times more volatile than AerCap Holdings NV. It trades about -0.05 of its total potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.16 per unit of volatility. If you would invest  8,217  in AerCap Holdings NV on September 5, 2024 and sell it today you would earn a total of  1,153  from holding AerCap Holdings NV or generate 14.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

PT Bank Rakyat  vs.  AerCap Holdings NV

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AerCap Holdings NV

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AerCap Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and AerCap Holdings

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

The idea behind PT Bank Rakyat and AerCap Holdings NV 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.