Correlation Between PT Bank and WESTERN DIGITAL

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

Diversification Opportunities for PT Bank and WESTERN DIGITAL

-0.48

Correlation Coefficient

PT Bank  WESTERN DIGITAL

Very good diversification

The 3 months correlation between BYRA and WESTERN is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL 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 WESTERN DIGITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN DIGITAL has no effect on the direction of PT Bank i.e., PT Bank and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between PT Bank and WESTERN DIGITAL

Assuming the 90 days trading horizon PT Bank Rakyat is expected to generate 2.39 times more return on investment than WESTERN DIGITAL. However, PT Bank is 2.39 times more volatile than WESTERN DIGITAL. It trades about 0.02 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.01 per unit of risk. If you would invest  26.00  in PT Bank Rakyat on September 3, 2024 and sell it today you would lose (1.00) from holding PT Bank Rakyat or give up 3.85% of portfolio value over 90 days.

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

PT Bank Rakyat  vs.  WESTERN DIGITAL

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 nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

WESTERN DIGITAL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN DIGITAL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, WESTERN DIGITAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and WESTERN DIGITAL

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

The idea behind PT Bank Rakyat and WESTERN DIGITAL 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.