Correlation Between PT Adaro and PT Bumi
Can any of the company-specific risk be diversified away by investing in both PT Adaro and PT Bumi 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 Adaro and PT Bumi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Adaro Energy and PT Bumi Resources, you can compare the effects of market volatilities on PT Adaro and PT Bumi 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 Adaro with a short position of PT Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Adaro and PT Bumi.
Diversification Opportunities for PT Adaro and PT Bumi
Good diversification
The 3 months correlation between A64 and PJM is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PT Adaro Energy and PT Bumi Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bumi Resources and PT Adaro 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 Adaro Energy are associated (or correlated) with PT Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bumi Resources has no effect on the direction of PT Adaro i.e., PT Adaro and PT Bumi go up and down completely randomly.
Pair Corralation between PT Adaro and PT Bumi
Assuming the 90 days horizon PT Adaro Energy is expected to under-perform the PT Bumi. In addition to that, PT Adaro is 1.12 times more volatile than PT Bumi Resources. It trades about -0.22 of its total potential returns per unit of risk. PT Bumi Resources is currently generating about 0.07 per unit of volatility. If you would invest 0.75 in PT Bumi Resources on September 5, 2024 and sell it today you would earn a total of 0.05 from holding PT Bumi Resources or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Adaro Energy vs. PT Bumi Resources
Performance |
| Timeline |
| PT Adaro Energy |
| PT Bumi Resources |
PT Adaro and PT Bumi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Adaro and PT Bumi
The main advantage of trading using opposite PT Adaro and PT Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Adaro position performs unexpectedly, PT Bumi 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 PT Bumi will offset losses from the drop in PT Bumi's long position.| PT Adaro vs. PT Bayan Resources | PT Adaro vs. Yanzhou Coal Mining | PT Adaro vs. Yanzhou Coal Mining | PT Adaro vs. PT Bumi Resources |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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