Correlation Between Bank Negara and Kelt Exploration

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

Diversification Opportunities for Bank Negara and Kelt Exploration

-0.49

Correlation Coefficient

Bank Negara  Kelt Exploration

Very good diversification

The 3 months correlation between Bank and Kelt is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Kelt Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kelt Exploration 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 Kelt Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kelt Exploration has no effect on the direction of Bank Negara i.e., Bank Negara and Kelt Exploration go up and down completely randomly.

Pair Corralation between Bank Negara and Kelt Exploration

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Kelt Exploration. In addition to that, Bank Negara is 1.87 times more volatile than Kelt Exploration. It trades about -0.01 of its total potential returns per unit of risk. Kelt Exploration is currently generating about 0.08 per unit of volatility. If you would invest  442.00  in Kelt Exploration on September 3, 2024 and sell it today you would earn a total of  58.00  from holding Kelt Exploration or generate 13.12% 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.  Kelt Exploration

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 fairly strong basic indicators, Bank Negara is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kelt Exploration

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kelt Exploration are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kelt Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Kelt Exploration

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

The idea behind Bank Negara Indonesia and Kelt Exploration 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.