Correlation Between Bank Negara and FAST Acquisition

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

Diversification Opportunities for Bank Negara and FAST Acquisition

-0.67

Correlation Coefficient

Bank Negara  FAST Acquisition

Excellent diversification

The 3 months correlation between Bank and FAST is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and FAST Acquisition II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST Acquisition 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 FAST Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST Acquisition has no effect on the direction of Bank Negara i.e., Bank Negara and FAST Acquisition go up and down completely randomly.

Pair Corralation between Bank Negara and FAST Acquisition

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 20.06 times more return on investment than FAST Acquisition. However, Bank Negara is 20.06 times more volatile than FAST Acquisition II. It trades about 0.03 of its potential returns per unit of risk. FAST Acquisition II is currently generating about 0.13 per unit of risk. If you would invest  1,336  in Bank Negara Indonesia on September 17, 2024 and sell it today you would earn a total of  127.00  from holding Bank Negara Indonesia or generate 9.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	22.42%
Values	Daily Returns

Bank Negara Indonesia  vs.  FAST Acquisition II

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 weak 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.

FAST Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank Negara and FAST Acquisition

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

The idea behind Bank Negara Indonesia and FAST Acquisition II 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.