Correlation Between Bank Negara and Swiss Re

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

Diversification Opportunities for Bank Negara and Swiss Re

-0.53

Correlation Coefficient

Bank Negara  Swiss Re

Excellent diversification

The 3 months correlation between Bank and Swiss is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Swiss Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re 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 Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re has no effect on the direction of Bank Negara i.e., Bank Negara and Swiss Re go up and down completely randomly.

Pair Corralation between Bank Negara and Swiss Re

Assuming the 90 days horizon Bank Negara Indonesia is expected to under-perform the Swiss Re. In addition to that, Bank Negara is 2.98 times more volatile than Swiss Re. It trades about -0.08 of its total potential returns per unit of risk. Swiss Re is currently generating about 0.09 per unit of volatility. If you would invest  3,424  in Swiss Re on September 19, 2024 and sell it today you would earn a total of  295.00  from holding Swiss Re or generate 8.62% 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.  Swiss Re

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.

Swiss Re

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Negara and Swiss Re

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

The idea behind Bank Negara Indonesia and Swiss Re 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.