Correlation Between Main Street and PT Bank

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

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

Diversification Opportunities for Main Street and PT Bank

-0.64

Correlation Coefficient

Main Street  PT Bank

Excellent diversification

The 3 months correlation between Main and BKRKF is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and Main Street 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 Main Street Financial are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Main Street i.e., Main Street and PT Bank go up and down completely randomly.

Pair Corralation between Main Street and PT Bank

Given the investment horizon of 90 days Main Street is expected to generate 99.83 times less return on investment than PT Bank. But when comparing it to its historical volatility, Main Street Financial is 2.22 times less risky than PT Bank. It trades about 0.0 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  26.00  in PT Bank Rakyat on September 12, 2024 and sell it today you would earn a total of  3.00  from holding PT Bank Rakyat or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	81.78%
Values	Daily Returns

Main Street Financial  vs.  PT Bank Rakyat

Main Street Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Main Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 forward-looking signals, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Main Street and PT Bank

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

The idea behind Main Street Financial and PT Bank Rakyat 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.