Correlation Between Bank Rakyat and Bank Pan

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

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

Diversification Opportunities for Bank Rakyat and Bank Pan

0.48

Correlation Coefficient

Bank Rakyat  Bank Pan

Very weak diversification

The 3 months correlation between Bank and Bank is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank Rakyat Indonesia and Bank Pan Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Pan Indonesia and Bank Rakyat 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 Rakyat Indonesia are associated (or correlated) with Bank Pan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Pan Indonesia has no effect on the direction of Bank Rakyat i.e., Bank Rakyat and Bank Pan go up and down completely randomly.

Pair Corralation between Bank Rakyat and Bank Pan

Assuming the 90 days trading horizon Bank Rakyat Indonesia is expected to under-perform the Bank Pan. In addition to that, Bank Rakyat is 1.18 times more volatile than Bank Pan Indonesia. It trades about -0.38 of its total potential returns per unit of risk. Bank Pan Indonesia is currently generating about -0.06 per unit of volatility. If you would invest  114,500  in Bank Pan Indonesia on February 1, 2024 and sell it today you would lose (3,000) from holding Bank Pan Indonesia or give up 2.62% of portfolio value over 90 days.

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

Bank Rakyat Indonesia  vs.  Bank Pan Indonesia

Bank Rakyat Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Rakyat Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bank Pan Indonesia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Pan Indonesia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Bank Pan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank Rakyat and Bank Pan

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

The idea behind Bank Rakyat Indonesia and Bank Pan Indonesia 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.