Correlation Between PT Bank and Watsco

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

Diversification Opportunities for PT Bank and Watsco

-0.57

Correlation Coefficient

PT Bank  Watsco

Excellent diversification

The 3 months correlation between PQ9 and Watsco is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc 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 Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of PT Bank i.e., PT Bank and Watsco go up and down completely randomly.

Pair Corralation between PT Bank and Watsco

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Watsco. In addition to that, PT Bank is 2.44 times more volatile than Watsco Inc. It trades about -0.07 of its total potential returns per unit of risk. Watsco Inc is currently generating about 0.08 per unit of volatility. If you would invest  44,220  in Watsco Inc on September 26, 2024 and sell it today you would earn a total of  2,460  from holding Watsco Inc or generate 5.56% 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.  Watsco Inc

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.

Watsco Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Watsco Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Watsco is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and Watsco

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

The idea behind PT Bank Mandiri and Watsco Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.