Correlation Between PT Bank and ALLSTATE

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

By analyzing existing cross correlation between PT Bank Mandiri and ALLSTATE, you can compare the effects of market volatilities on PT Bank and ALLSTATE 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 ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and ALLSTATE.

Diversification Opportunities for PT Bank and ALLSTATE

-0.12

Correlation Coefficient

PT Bank  ALLSTATE

Good diversification

The 3 months correlation between PQ9 and ALLSTATE is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and ALLSTATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE 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 Mandiri are associated (or correlated) with ALLSTATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLSTATE has no effect on the direction of PT Bank i.e., PT Bank and ALLSTATE go up and down completely randomly.

Pair Corralation between PT Bank and ALLSTATE

Assuming the 90 days horizon PT Bank Mandiri is expected to generate 5.19 times more return on investment than ALLSTATE. However, PT Bank is 5.19 times more volatile than ALLSTATE. It trades about 0.05 of its potential returns per unit of risk. ALLSTATE is currently generating about -0.2 per unit of risk. If you would invest  33.00  in PT Bank Mandiri on March 11, 2024 and sell it today you would earn a total of  1.00  from holding PT Bank Mandiri or generate 3.03% return on investment over 90 days.

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

PT Bank Mandiri  vs.  ALLSTATE

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ALLSTATE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ALLSTATE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ALLSTATE may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with PT Bank and ALLSTATE

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

The idea behind PT Bank Mandiri and ALLSTATE 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..