Correlation Between Pabrik Kertas and Bank Tabungan

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

By analyzing existing cross correlation between Pabrik Kertas Tjiwi and Bank Tabungan Pensiunan, you can compare the effects of market volatilities on Pabrik Kertas and Bank Tabungan 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 Pabrik Kertas with a short position of Bank Tabungan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pabrik Kertas and Bank Tabungan.

Diversification Opportunities for Pabrik Kertas and Bank Tabungan

-0.73

Correlation Coefficient

Pabrik Kertas  Bank Tabungan

Pay attention - limited upside

The 3 months correlation between Pabrik and Bank is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pabrik Kertas Tjiwi and Bank Tabungan Pensiunan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Tabungan Pensiunan and Pabrik Kertas 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 Pabrik Kertas Tjiwi are associated (or correlated) with Bank Tabungan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Tabungan Pensiunan has no effect on the direction of Pabrik Kertas i.e., Pabrik Kertas and Bank Tabungan go up and down completely randomly.

Pair Corralation between Pabrik Kertas and Bank Tabungan

Assuming the 90 days trading horizon Pabrik Kertas Tjiwi is expected to generate 0.76 times more return on investment than Bank Tabungan. However, Pabrik Kertas Tjiwi is 1.31 times less risky than Bank Tabungan. It trades about 0.22 of its potential returns per unit of risk. Bank Tabungan Pensiunan is currently generating about -0.05 per unit of risk. If you would invest  665,000  in Pabrik Kertas Tjiwi on February 5, 2024 and sell it today you would earn a total of  132,500  from holding Pabrik Kertas Tjiwi or generate 19.92% return on investment over 90 days.

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

Pabrik Kertas Tjiwi  vs.  Bank Tabungan Pensiunan

Pabrik Kertas Tjiwi

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pabrik Kertas Tjiwi are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pabrik Kertas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank Tabungan Pensiunan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Tabungan Pensiunan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Pabrik Kertas and Bank Tabungan

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

The idea behind Pabrik Kertas Tjiwi and Bank Tabungan Pensiunan 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.