Correlation Between Bank Negara and Ciputra Development

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

Diversification Opportunities for Bank Negara and Ciputra Development

0.78

Correlation Coefficient

Bank Negara  Ciputra Development

Poor diversification

The 3 months correlation between Bank and Ciputra is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Ciputra Development Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciputra Development Tbk 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 Ciputra Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciputra Development Tbk has no effect on the direction of Bank Negara i.e., Bank Negara and Ciputra Development go up and down completely randomly.

Pair Corralation between Bank Negara and Ciputra Development

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the Ciputra Development. But the stock apears to be less risky and, when comparing its historical volatility, Bank Negara Indonesia is 1.08 times less risky than Ciputra Development. The stock trades about -0.19 of its potential returns per unit of risk. The Ciputra Development Tbk is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  122,000  in Ciputra Development Tbk on March 12, 2024 and sell it today you would lose (9,000) from holding Ciputra Development Tbk or give up 7.38% of portfolio value over 90 days.

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

Bank Negara Indonesia  vs.  Ciputra Development Tbk

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. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Ciputra Development Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ciputra Development Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Bank Negara and Ciputra Development

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

The idea behind Bank Negara Indonesia and Ciputra Development Tbk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.