Correlation Between Bank Negara and Biophytis

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

Diversification Opportunities for Bank Negara and Biophytis

0.63

Correlation Coefficient

Bank Negara  Biophytis

Poor diversification

The 3 months correlation between Bank and Biophytis is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Biophytis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biophytis 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 Biophytis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biophytis has no effect on the direction of Bank Negara i.e., Bank Negara and Biophytis go up and down completely randomly.

Pair Corralation between Bank Negara and Biophytis

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 0.71 times more return on investment than Biophytis. However, Bank Negara Indonesia is 1.41 times less risky than Biophytis. It trades about 0.04 of its potential returns per unit of risk. Biophytis is currently generating about -0.07 per unit of risk. If you would invest  1,438  in Bank Negara Indonesia on September 12, 2024 and sell it today you would earn a total of  152.00  from holding Bank Negara Indonesia or generate 10.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	67.61%
Values	Daily Returns

Bank Negara Indonesia  vs.  Biophytis

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Biophytis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biophytis has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Biophytis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank Negara and Biophytis

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

The idea behind Bank Negara Indonesia and Biophytis 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.