Correlation Between PT Bank and Covenant Logistics

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

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

Diversification Opportunities for PT Bank and Covenant Logistics

-0.54

Correlation Coefficient

PT Bank  Covenant Logistics

Excellent diversification

The 3 months correlation between BZG2 and Covenant is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics 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 Central are associated (or correlated) with Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of PT Bank i.e., PT Bank and Covenant Logistics go up and down completely randomly.

Pair Corralation between PT Bank and Covenant Logistics

Assuming the 90 days trading horizon PT Bank Central is expected to generate 3.47 times more return on investment than Covenant Logistics. However, PT Bank is 3.47 times more volatile than Covenant Logistics Group. It trades about 0.08 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about -0.12 per unit of risk. If you would invest  57.00  in PT Bank Central on September 29, 2024 and sell it today you would earn a total of  3.00  from holding PT Bank Central or generate 5.26% 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 Central  vs.  Covenant Logistics Group

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Covenant Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Covenant Logistics

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

The idea behind PT Bank Central and Covenant Logistics Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.