Correlation Between Bank Negara and Hummingbird Resources

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

Diversification Opportunities for Bank Negara and Hummingbird Resources

0.75

Correlation Coefficient

Bank Negara  Hummingbird Resources

Poor diversification

The 3 months correlation between Bank and Hummingbird is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Hummingbird Resources PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hummingbird Resources PLC 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 Hummingbird Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hummingbird Resources PLC has no effect on the direction of Bank Negara i.e., Bank Negara and Hummingbird Resources go up and down completely randomly.

Pair Corralation between Bank Negara and Hummingbird Resources

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 0.22 times more return on investment than Hummingbird Resources. However, Bank Negara Indonesia is 4.47 times less risky than Hummingbird Resources. It trades about -0.11 of its potential returns per unit of risk. Hummingbird Resources PLC is currently generating about -0.23 per unit of risk. If you would invest  1,584  in Bank Negara Indonesia on September 5, 2024 and sell it today you would lose (182.00) from holding Bank Negara Indonesia or give up 11.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Bank Negara Indonesia  vs.  Hummingbird Resources PLC

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.

Hummingbird Resources PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hummingbird Resources PLC 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 Hummingbird Resources

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

The idea behind Bank Negara Indonesia and Hummingbird Resources PLC 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.