Correlation Between Bank Negara and PHP Ventures

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

Diversification Opportunities for Bank Negara and PHP Ventures

-0.27

Correlation Coefficient

Bank Negara  PHP Ventures

Very good diversification

The 3 months correlation between Bank and PHP is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and PHP Ventures Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHP Ventures 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 PHP Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHP Ventures Acquisition has no effect on the direction of Bank Negara i.e., Bank Negara and PHP Ventures go up and down completely randomly.

Pair Corralation between Bank Negara and PHP Ventures

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 20.37 times more return on investment than PHP Ventures. However, Bank Negara is 20.37 times more volatile than PHP Ventures Acquisition. It trades about 0.03 of its potential returns per unit of risk. PHP Ventures Acquisition is currently generating about 0.11 per unit of risk. If you would invest  1,401  in Bank Negara Indonesia on September 18, 2024 and sell it today you would lose (10.00) from holding Bank Negara Indonesia or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.89%
Values	Daily Returns

Bank Negara Indonesia  vs.  PHP Ventures Acquisition

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.

PHP Ventures Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHP Ventures Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, PHP Ventures is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank Negara and PHP Ventures

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

The idea behind Bank Negara Indonesia and PHP Ventures Acquisition 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.