Correlation Between Bank Negara and Blue Lagoon

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

By analyzing existing cross correlation between Bank Negara Indonesia and Blue Lagoon Resources, you can compare the effects of market volatilities on Bank Negara and Blue Lagoon 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 Bank Negara with a short position of Blue Lagoon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Blue Lagoon.

Diversification Opportunities for Bank Negara and Blue Lagoon

-0.41

Correlation Coefficient

Bank Negara  Blue Lagoon

Very good diversification

The 3 months correlation between Bank and Blue is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Blue Lagoon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Lagoon Resources and Bank Negara 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 Bank Negara Indonesia are associated (or correlated) with Blue Lagoon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Lagoon Resources has no effect on the direction of Bank Negara i.e., Bank Negara and Blue Lagoon go up and down completely randomly.

Pair Corralation between Bank Negara and Blue Lagoon

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 0.81 times more return on investment than Blue Lagoon. However, Bank Negara Indonesia is 1.24 times less risky than Blue Lagoon. It trades about 0.03 of its potential returns per unit of risk. Blue Lagoon Resources is currently generating about 0.02 per unit of risk. If you would invest  1,364  in Bank Negara Indonesia on September 13, 2024 and sell it today you would earn a total of  97.00  from holding Bank Negara Indonesia or generate 7.11% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Blue Lagoon Resources

Bank Negara Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Negara Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Blue Lagoon Resources

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Lagoon Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Blue Lagoon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Blue Lagoon

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

The idea behind Bank Negara Indonesia and Blue Lagoon Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.