Correlation Between Asuransi Ramayana and Bank Mega

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

By analyzing existing cross correlation between Asuransi Ramayana Tbk and Bank Mega Tbk, you can compare the effects of market volatilities on Asuransi Ramayana and Bank Mega 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 Asuransi Ramayana with a short position of Bank Mega. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asuransi Ramayana and Bank Mega.

Diversification Opportunities for Asuransi Ramayana and Bank Mega

0.27

Correlation Coefficient

Asuransi Ramayana  Bank Mega

Modest diversification

The 3 months correlation between Asuransi and Bank is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Asuransi Ramayana Tbk and Bank Mega Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mega Tbk and Asuransi Ramayana 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 Asuransi Ramayana Tbk are associated (or correlated) with Bank Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mega Tbk has no effect on the direction of Asuransi Ramayana i.e., Asuransi Ramayana and Bank Mega go up and down completely randomly.

Pair Corralation between Asuransi Ramayana and Bank Mega

Assuming the 90 days trading horizon Asuransi Ramayana is expected to generate 3.83 times less return on investment than Bank Mega. But when comparing it to its historical volatility, Asuransi Ramayana Tbk is 1.01 times less risky than Bank Mega. It trades about 0.02 of its potential returns per unit of risk. Bank Mega Tbk is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  478,051  in Bank Mega Tbk on February 23, 2024 and sell it today you would earn a total of  31,949  from holding Bank Mega Tbk or generate 6.68% return on investment over 90 days.

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

Asuransi Ramayana Tbk  vs.  Bank Mega Tbk

Asuransi Ramayana Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asuransi Ramayana Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Asuransi Ramayana is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bank Mega Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Mega Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Bank Mega may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Asuransi Ramayana and Bank Mega

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

The idea behind Asuransi Ramayana Tbk and Bank Mega 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.