Correlation Between PT Hexindo and National Bank

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

By analyzing existing cross correlation between PT Hexindo Adiperkasa and National Bank Holdings, you can compare the effects of market volatilities on PT Hexindo and National Bank 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 Hexindo with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Hexindo and National Bank.

Diversification Opportunities for PT Hexindo and National Bank

-0.83

Correlation Coefficient

PT Hexindo  National Bank

Pay attention - limited upside

The 3 months correlation between HX1A and National is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding PT Hexindo Adiperkasa and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and PT Hexindo 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 Hexindo Adiperkasa are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of PT Hexindo i.e., PT Hexindo and National Bank go up and down completely randomly.

Pair Corralation between PT Hexindo and National Bank

Assuming the 90 days trading horizon PT Hexindo Adiperkasa is expected to under-perform the National Bank. In addition to that, PT Hexindo is 1.59 times more volatile than National Bank Holdings. It trades about -0.08 of its total potential returns per unit of risk. National Bank Holdings is currently generating about 0.1 per unit of volatility. If you would invest  3,880  in National Bank Holdings on August 31, 2024 and sell it today you would earn a total of  620.00  from holding National Bank Holdings or generate 15.98% return on investment over 90 days.

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

PT Hexindo Adiperkasa  vs.  National Bank Holdings

PT Hexindo Adiperkasa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Hexindo Adiperkasa 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 December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

National Bank Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Hexindo and National Bank

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

The idea behind PT Hexindo Adiperkasa and National Bank Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.