Correlation Between Bank Dinar and Wahana Ottomitra

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

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

Diversification Opportunities for Bank Dinar and Wahana Ottomitra

-0.55

Correlation Coefficient

Bank Dinar  Wahana Ottomitra

Excellent diversification

The 3 months correlation between Bank and Wahana is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank Dinar Indonesia and Wahana Ottomitra Multiartha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahana Ottomitra Mul and Bank Dinar 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 Dinar Indonesia are associated (or correlated) with Wahana Ottomitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahana Ottomitra Mul has no effect on the direction of Bank Dinar i.e., Bank Dinar and Wahana Ottomitra go up and down completely randomly.

Pair Corralation between Bank Dinar and Wahana Ottomitra

Assuming the 90 days trading horizon Bank Dinar Indonesia is expected to generate 7.39 times more return on investment than Wahana Ottomitra. However, Bank Dinar is 7.39 times more volatile than Wahana Ottomitra Multiartha. It trades about 0.04 of its potential returns per unit of risk. Wahana Ottomitra Multiartha is currently generating about -0.03 per unit of risk. If you would invest  12,400  in Bank Dinar Indonesia on September 16, 2024 and sell it today you would earn a total of  200.00  from holding Bank Dinar Indonesia or generate 1.61% return on investment over 90 days.

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

Bank Dinar Indonesia  vs.  Wahana Ottomitra Multiartha

Bank Dinar Indonesia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Dinar Indonesia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Dinar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Wahana Ottomitra Mul

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank Dinar and Wahana Ottomitra

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

The idea behind Bank Dinar Indonesia and Wahana Ottomitra Multiartha 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.