Correlation Between PT Bank and Shoprite Holdings

Can any of the company-specific risk be diversified away by investing in both PT Bank and Shoprite Holdings 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 Shoprite Holdings 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 Shoprite Holdings Limited, you can compare the effects of market volatilities on PT Bank and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and Shoprite Holdings.

Diversification Opportunities for PT Bank and Shoprite Holdings

-0.54

Correlation Coefficient

PT Bank  Shoprite Holdings

Excellent diversification

The 3 months correlation between PQ9 and Shoprite is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of PT Bank i.e., PT Bank and Shoprite Holdings go up and down completely randomly.

Pair Corralation between PT Bank and Shoprite Holdings

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Shoprite Holdings. But the stock apears to be less risky and, when comparing its historical volatility, PT Bank Mandiri is 1.11 times less risky than Shoprite Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The Shoprite Holdings Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,125  in Shoprite Holdings Limited on September 24, 2024 and sell it today you would earn a total of  435.00  from holding Shoprite Holdings Limited or generate 38.67% 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 Mandiri  vs.  Shoprite Holdings Limited

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.

Shoprite Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shoprite Holdings Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shoprite Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Shoprite Holdings

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

The idea behind PT Bank Mandiri and Shoprite Holdings Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.