Correlation Between Bank Bukopin and Ace Hardware

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

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

Diversification Opportunities for Bank Bukopin and Ace Hardware

-0.27

Correlation Coefficient

Bank Bukopin  Ace Hardware

Very good diversification

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

Pair Corralation between Bank Bukopin and Ace Hardware

Assuming the 90 days trading horizon Bank Bukopin Tbk is expected to under-perform the Ace Hardware. But the stock apears to be less risky and, when comparing its historical volatility, Bank Bukopin Tbk is 1.27 times less risky than Ace Hardware. The stock trades about -0.09 of its potential returns per unit of risk. The Ace Hardware Indonesia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  83,000  in Ace Hardware Indonesia on February 5, 2024 and sell it today you would earn a total of  5,500  from holding Ace Hardware Indonesia or generate 6.63% return on investment over 90 days.

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

Bank Bukopin Tbk  vs.  Ace Hardware Indonesia

Bank Bukopin Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Bukopin Tbk 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.

Ace Hardware Indonesia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ace Hardware Indonesia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Ace Hardware disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Bukopin and Ace Hardware

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

The idea behind Bank Bukopin Tbk and Ace Hardware 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.