Correlation Between Bank Negara and American Business

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

Diversification Opportunities for Bank Negara and American Business

-0.79

Correlation Coefficient

Bank Negara  American Business

Pay attention - limited upside

The 3 months correlation between Bank and American is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business 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 American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of Bank Negara i.e., Bank Negara and American Business go up and down completely randomly.

Pair Corralation between Bank Negara and American Business

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 3.94 times more return on investment than American Business. However, Bank Negara is 3.94 times more volatile than American Business Bk. It trades about 0.03 of its potential returns per unit of risk. American Business Bk is currently generating about 0.02 per unit of risk. If you would invest  1,364  in Bank Negara Indonesia on September 13, 2024 and sell it today you would earn a total of  227.00  from holding Bank Negara Indonesia or generate 16.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.75%
Values	Daily Returns

Bank Negara Indonesia  vs.  American Business Bk

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 fairly strong basic indicators, Bank Negara is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Business

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, American Business showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Negara and American Business

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

The idea behind Bank Negara Indonesia and American Business Bk 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.