Correlation Between Darma Henwa and Bumi Resources
Can any of the company-specific risk be diversified away by investing in both Darma Henwa and Bumi Resources 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 Darma Henwa and Bumi Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darma Henwa Tbk and Bumi Resources Tbk, you can compare the effects of market volatilities on Darma Henwa and Bumi Resources 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 Darma Henwa with a short position of Bumi Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darma Henwa and Bumi Resources.
Diversification Opportunities for Darma Henwa and Bumi Resources
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Darma and Bumi is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Darma Henwa Tbk and Bumi Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Resources Tbk and Darma Henwa 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 Darma Henwa Tbk are associated (or correlated) with Bumi Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Resources Tbk has no effect on the direction of Darma Henwa i.e., Darma Henwa and Bumi Resources go up and down completely randomly.
Pair Corralation between Darma Henwa and Bumi Resources
Assuming the 90 days trading horizon Darma Henwa Tbk is expected to generate 1.21 times more return on investment than Bumi Resources. However, Darma Henwa is 1.21 times more volatile than Bumi Resources Tbk. It trades about 0.1 of its potential returns per unit of risk. Bumi Resources Tbk is currently generating about 0.01 per unit of risk. If you would invest 10,700 in Darma Henwa Tbk on August 24, 2024 and sell it today you would earn a total of 1,300 from holding Darma Henwa Tbk or generate 12.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Darma Henwa Tbk vs. Bumi Resources Tbk
Performance |
| Timeline |
| Darma Henwa Tbk |
| Bumi Resources Tbk |
Darma Henwa and Bumi Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darma Henwa and Bumi Resources
The main advantage of trading using opposite Darma Henwa and Bumi Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darma Henwa position performs unexpectedly, Bumi Resources 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 Bumi Resources will offset losses from the drop in Bumi Resources' long position.| Darma Henwa vs. Kedaung Indah Can | Darma Henwa vs. Langgeng Makmur Industri | Darma Henwa vs. Kabelindo Murni Tbk | Darma Henwa vs. Mustika Ratu Tbk |
| Bumi Resources vs. Petrosea Tbk | Bumi Resources vs. Harum Energy Tbk | Bumi Resources vs. Perdana Karya Perkasa | Bumi Resources vs. Samindo Resources Tbk |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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