Correlation Between Bank Pan and Bank Jabar
Can any of the company-specific risk be diversified away by investing in both Bank Pan and Bank Jabar 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 Pan and Bank Jabar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Pan Indonesia and Bank Jabar, you can compare the effects of market volatilities on Bank Pan and Bank Jabar 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 Pan with a short position of Bank Jabar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Pan and Bank Jabar.
Diversification Opportunities for Bank Pan and Bank Jabar
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Bank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank Pan Indonesia and Bank Jabar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Jabar and Bank Pan 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 Pan Indonesia are associated (or correlated) with Bank Jabar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Jabar has no effect on the direction of Bank Pan i.e., Bank Pan and Bank Jabar go up and down completely randomly.
Pair Corralation between Bank Pan and Bank Jabar
Assuming the 90 days trading horizon Bank Pan Indonesia is expected to generate 3.95 times more return on investment than Bank Jabar. However, Bank Pan is 3.95 times more volatile than Bank Jabar. It trades about 0.03 of its potential returns per unit of risk. Bank Jabar is currently generating about -0.04 per unit of risk. If you would invest 93,876 in Bank Pan Indonesia on February 1, 2024 and sell it today you would earn a total of 17,624 from holding Bank Pan Indonesia or generate 18.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.79% |
Values | Daily Returns |
Bank Pan Indonesia vs. Bank Jabar
Performance |
Timeline |
Bank Pan Indonesia |
Bank Jabar |
Bank Pan and Bank Jabar Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank Pan and Bank Jabar
The main advantage of trading using opposite Bank Pan and Bank Jabar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Pan position performs unexpectedly, Bank Jabar 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 Jabar will offset losses from the drop in Bank Jabar's long position.The idea behind Bank Pan Indonesia and Bank Jabar 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.Check out your portfolio center.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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