Correlation Between PT Bayan and PT Bumi
Can any of the company-specific risk be diversified away by investing in both PT Bayan 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 Bayan 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 Bayan Resources and PT Bumi Resources, you can compare the effects of market volatilities on PT Bayan 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 Bayan with a short position of PT Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bayan and PT Bumi.
Diversification Opportunities for PT Bayan and PT Bumi
Poor diversification
The 3 months correlation between BNB and PJM is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PT Bayan Resources 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 Bayan 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 Bayan Resources 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 Bayan i.e., PT Bayan and PT Bumi go up and down completely randomly.
Pair Corralation between PT Bayan and PT Bumi
Assuming the 90 days horizon PT Bayan is expected to generate 1.48 times less return on investment than PT Bumi. But when comparing it to its historical volatility, PT Bayan Resources is 2.13 times less risky than PT Bumi. It trades about 0.04 of its potential returns per unit of risk. PT Bumi Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.95 in PT Bumi Resources on September 3, 2024 and sell it today you would lose (0.15) from holding PT Bumi Resources or give up 15.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Bayan Resources vs. PT Bumi Resources
Performance |
| Timeline |
| PT Bayan Resources |
| PT Bumi Resources |
PT Bayan and PT Bumi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bayan and PT Bumi
The main advantage of trading using opposite PT Bayan and PT Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bayan 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 Bayan vs. Charter Communications | PT Bayan vs. Arrow Electronics | PT Bayan vs. Richardson Electronics | PT Bayan vs. AOI Electronics Co |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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