Correlation Between Bank Maybank and Bank Negara
Can any of the company-specific risk be diversified away by investing in both Bank Maybank and Bank Negara 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 Maybank and Bank Negara into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Maybank Indonesia and Bank Negara Indonesia, you can compare the effects of market volatilities on Bank Maybank and Bank Negara 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 Maybank with a short position of Bank Negara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Maybank and Bank Negara.
Diversification Opportunities for Bank Maybank and Bank Negara
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Bank is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank Maybank Indonesia and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia and Bank Maybank 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 Maybank Indonesia are associated (or correlated) with Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of Bank Maybank i.e., Bank Maybank and Bank Negara go up and down completely randomly.
Pair Corralation between Bank Maybank and Bank Negara
Assuming the 90 days trading horizon Bank Maybank is expected to generate 1033.68 times less return on investment than Bank Negara. But when comparing it to its historical volatility, Bank Maybank Indonesia is 31.69 times less risky than Bank Negara. It trades about 0.0 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 403,714 in Bank Negara Indonesia on January 20, 2024 and sell it today you would earn a total of 116,286 from holding Bank Negara Indonesia or generate 28.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Bank Maybank Indonesia vs. Bank Negara Indonesia
Performance |
Timeline |
Bank Maybank Indonesia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Bank Negara Indonesia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank Maybank and Bank Negara Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank Maybank and Bank Negara
The main advantage of trading using opposite Bank Maybank and Bank Negara positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Maybank position performs unexpectedly, Bank Negara 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 Negara will offset losses from the drop in Bank Negara's long position.The idea behind Bank Maybank Indonesia and Bank Negara Indonesia 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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