Correlation Between PT Bank and WW Grainger

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

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

Diversification Opportunities for PT Bank and WW Grainger

-0.64

Correlation Coefficient

PT Bank  WW Grainger

Excellent diversification

The 3 months correlation between PQ9 and GWW is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger 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 Mandiri are associated (or correlated) with WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of PT Bank i.e., PT Bank and WW Grainger go up and down completely randomly.

Pair Corralation between PT Bank and WW Grainger

Assuming the 90 days horizon PT Bank is expected to generate 1.2 times less return on investment than WW Grainger. In addition to that, PT Bank is 2.9 times more volatile than WW Grainger. It trades about 0.03 of its total potential returns per unit of risk. WW Grainger is currently generating about 0.1 per unit of volatility. If you would invest  50,762  in WW Grainger on September 26, 2024 and sell it today you would earn a total of  52,688  from holding WW Grainger or generate 103.79% return on investment over 90 days.

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

PT Bank Mandiri  vs.  WW Grainger

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

WW Grainger

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WW Grainger may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and WW Grainger

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

The idea behind PT Bank Mandiri and WW Grainger 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.