Correlation Between PT Bank and Citizens Bancorp

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

Diversification Opportunities for PT Bank and Citizens Bancorp

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between BKRKF and Citizens is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Rakyat and Citizens Bancorp Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Bancorp Inv 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 Citizens Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Bancorp Inv has no effect on the direction of PT Bank i.e., PT Bank and Citizens Bancorp go up and down completely randomly.

Pair Corralation between PT Bank and Citizens Bancorp

Assuming the 90 days horizon PT Bank Rakyat is expected to generate 3.12 times more return on investment than Citizens Bancorp. However, PT Bank is 3.12 times more volatile than Citizens Bancorp Investment. It trades about -0.05 of its potential returns per unit of risk. Citizens Bancorp Investment is currently generating about -0.23 per unit of risk. If you would invest  35.00  in PT Bank Rakyat on March 13, 2024 and sell it today you would lose (10.00) from holding PT Bank Rakyat or give up 28.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

PT Bank Rakyat  vs.  Citizens Bancorp Investment

 Performance 
       Timeline  
PT Bank Rakyat 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Citizens Bancorp Inv 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Citizens Bancorp Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

PT Bank and Citizens Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PT Bank and Citizens Bancorp

The main advantage of trading using opposite PT Bank and Citizens Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank position performs unexpectedly, Citizens Bancorp 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 Citizens Bancorp will offset losses from the drop in Citizens Bancorp's long position.
The idea behind PT Bank Rakyat and Citizens Bancorp Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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