Correlation Between PT Bank and AMG Advanced

Can any of the company-specific risk be diversified away by investing in both PT Bank and AMG Advanced 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 AMG Advanced 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 AMG Advanced Metallurgical, you can compare the effects of market volatilities on PT Bank and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bank and AMG Advanced.

Diversification Opportunities for PT Bank and AMG Advanced

-0.05

Correlation Coefficient

PT Bank  AMG Advanced

Good diversification

The 3 months correlation between PQ9 and AMG is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of PT Bank i.e., PT Bank and AMG Advanced go up and down completely randomly.

Pair Corralation between PT Bank and AMG Advanced

Assuming the 90 days horizon PT Bank Mandiri is expected to generate 2.62 times more return on investment than AMG Advanced. However, PT Bank is 2.62 times more volatile than AMG Advanced Metallurgical. It trades about -0.02 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about -0.24 per unit of risk. If you would invest  34.00  in PT Bank Mandiri on March 8, 2024 and sell it today you would lose (2.00) from holding PT Bank Mandiri or give up 5.88% of portfolio value over 90 days.

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

PT Bank Mandiri  vs.  AMG Advanced Metallurgical

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AMG Advanced Metallu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMG Advanced Metallurgical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AMG Advanced is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PT Bank and AMG Advanced

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

The idea behind PT Bank Mandiri and AMG Advanced Metallurgical 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.