Correlation Between State Bank and PT Bank

Can any of the company-specific risk be diversified away by investing in both State Bank and PT Bank 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 State Bank and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Bank of and PT Bank Mandiri, you can compare the effects of market volatilities on State Bank and PT Bank 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 State Bank with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and PT Bank.

Diversification Opportunities for State Bank and PT Bank

-0.65

Correlation Coefficient

State Bank  PT Bank

Excellent diversification

The 3 months correlation between State and PQ9 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and PT Bank Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Mandiri and State Bank 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 State Bank of are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Mandiri has no effect on the direction of State Bank i.e., State Bank and PT Bank go up and down completely randomly.

Pair Corralation between State Bank and PT Bank

Assuming the 90 days horizon State Bank of is expected to generate 0.48 times more return on investment than PT Bank. However, State Bank of is 2.1 times less risky than PT Bank. It trades about 0.04 of its potential returns per unit of risk. PT Bank Mandiri is currently generating about -0.02 per unit of risk. If you would invest  8,950  in State Bank of on September 3, 2024 and sell it today you would earn a total of  300.00  from holding State Bank of or generate 3.35% return on investment over 90 days.

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

State Bank of  vs.  PT Bank Mandiri

State Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, State Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with State Bank and PT Bank

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

The idea behind State Bank of and PT Bank Mandiri 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.