Correlation Between PT Bank and Geely Automobile

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

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

Diversification Opportunities for PT Bank and Geely Automobile

-0.81

Correlation Coefficient

PT Bank  Geely Automobile

Pay attention - limited upside

The 3 months correlation between BYRA and Geely is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings and PT 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 PT Bank Rakyat are associated (or correlated) with Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of PT Bank i.e., PT Bank and Geely Automobile go up and down completely randomly.

Pair Corralation between PT Bank and Geely Automobile

Assuming the 90 days trading horizon PT Bank Rakyat is expected to under-perform the Geely Automobile. In addition to that, PT Bank is 1.92 times more volatile than Geely Automobile Holdings. It trades about -0.1 of its total potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.26 per unit of volatility. If you would invest  161.00  in Geely Automobile Holdings on September 21, 2024 and sell it today you would earn a total of  29.00  from holding Geely Automobile Holdings or generate 18.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

PT Bank Rakyat  vs.  Geely Automobile Holdings

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Geely Automobile Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Geely Automobile

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

The idea behind PT Bank Rakyat and Geely Automobile Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.