Correlation Between Bank Negara and Pinetree Capital

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

Diversification Opportunities for Bank Negara and Pinetree Capital

-0.8

Correlation Coefficient

Bank Negara  Pinetree Capital

Pay attention - limited upside

The 3 months correlation between Bank and Pinetree is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Pinetree Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinetree Capital 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 Pinetree Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinetree Capital has no effect on the direction of Bank Negara i.e., Bank Negara and Pinetree Capital go up and down completely randomly.

Pair Corralation between Bank Negara and Pinetree Capital

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Pinetree Capital. In addition to that, Bank Negara is 1.08 times more volatile than Pinetree Capital. It trades about -0.03 of its total potential returns per unit of risk. Pinetree Capital is currently generating about 0.13 per unit of volatility. If you would invest  516.00  in Pinetree Capital on September 15, 2024 and sell it today you would earn a total of  192.00  from holding Pinetree Capital or generate 37.21% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Pinetree Capital

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 fragile 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.

Pinetree Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pinetree Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Pinetree Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and Pinetree Capital

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

The idea behind Bank Negara Indonesia and Pinetree Capital 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..