Correlation Between Roda Vivatex and Bank Negara

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

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

Diversification Opportunities for Roda Vivatex and Bank Negara

0.56

Correlation Coefficient

Roda Vivatex  Bank Negara

Very weak diversification

The 3 months correlation between Roda and Bank is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Roda Vivatex Tbk 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 Roda Vivatex 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 Roda Vivatex Tbk 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 Roda Vivatex i.e., Roda Vivatex and Bank Negara go up and down completely randomly.

Pair Corralation between Roda Vivatex and Bank Negara

Assuming the 90 days trading horizon Roda Vivatex Tbk is expected to generate 0.49 times more return on investment than Bank Negara. However, Roda Vivatex Tbk is 2.05 times less risky than Bank Negara. It trades about -0.02 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about -0.18 per unit of risk. If you would invest  1,400,000  in Roda Vivatex Tbk on January 29, 2024 and sell it today you would lose (10,000) from holding Roda Vivatex Tbk or give up 0.71% of portfolio value over 90 days.

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

Roda Vivatex Tbk  vs.  Bank Negara Indonesia

Roda Vivatex Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roda Vivatex Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Roda Vivatex is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bank Negara Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Negara Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Bank Negara is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Roda Vivatex and Bank Negara

The main advantage of trading using opposite Roda Vivatex and Bank Negara positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roda Vivatex 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 Roda Vivatex Tbk 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.