Correlation Between PT Bank and Varta AG

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

Diversification Opportunities for PT Bank and Varta AG

0.39

Correlation Coefficient

PT Bank  Varta AG

Weak diversification

The 3 months correlation between PQ9 and Varta is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG 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 Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of PT Bank i.e., PT Bank and Varta AG go up and down completely randomly.

Pair Corralation between PT Bank and Varta AG

Assuming the 90 days horizon PT Bank Mandiri is expected to generate 0.56 times more return on investment than Varta AG. However, PT Bank Mandiri is 1.79 times less risky than Varta AG. It trades about 0.03 of its potential returns per unit of risk. Varta AG is currently generating about -0.02 per unit of risk. If you would invest  28.00  in PT Bank Mandiri on September 29, 2024 and sell it today you would earn a total of  4.00  from holding PT Bank Mandiri or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

PT Bank Mandiri  vs.  Varta AG

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.

Varta AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Varta AG

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

The idea behind PT Bank Mandiri and Varta AG 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.