Correlation Between Bank Negara and Freegold Ventures

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

Diversification Opportunities for Bank Negara and Freegold Ventures

0.86

Correlation Coefficient

Bank Negara  Freegold Ventures

Very poor diversification

The 3 months correlation between Bank and Freegold is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Freegold Ventures Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freegold Ventures 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 Freegold Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freegold Ventures has no effect on the direction of Bank Negara i.e., Bank Negara and Freegold Ventures go up and down completely randomly.

Pair Corralation between Bank Negara and Freegold Ventures

Assuming the 90 days horizon Bank Negara is expected to generate 8.03 times less return on investment than Freegold Ventures. In addition to that, Bank Negara is 1.34 times more volatile than Freegold Ventures Limited. It trades about 0.01 of its total potential returns per unit of risk. Freegold Ventures Limited is currently generating about 0.1 per unit of volatility. If you would invest  29.00  in Freegold Ventures Limited on September 30, 2024 and sell it today you would earn a total of  19.00  from holding Freegold Ventures Limited or generate 65.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Bank Negara Indonesia  vs.  Freegold Ventures Limited

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.

Freegold Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freegold Ventures Limited 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.

Pair Trading with Bank Negara and Freegold Ventures

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

The idea behind Bank Negara Indonesia and Freegold Ventures 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.