Correlation Between Samindo Resources and Bumi Resources
Can any of the company-specific risk be diversified away by investing in both Samindo Resources 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 Samindo Resources and Bumi Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samindo Resources Tbk and Bumi Resources Tbk, you can compare the effects of market volatilities on Samindo Resources 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 Samindo Resources with a short position of Bumi Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samindo Resources and Bumi Resources.
Diversification Opportunities for Samindo Resources and Bumi Resources
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Samindo and Bumi is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Samindo Resources 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 Samindo Resources 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 Samindo Resources 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 Samindo Resources i.e., Samindo Resources and Bumi Resources go up and down completely randomly.
Pair Corralation between Samindo Resources and Bumi Resources
Assuming the 90 days trading horizon Samindo Resources Tbk is expected to generate 0.48 times more return on investment than Bumi Resources. However, Samindo Resources Tbk is 2.1 times less risky than Bumi Resources. It trades about 0.34 of its potential returns per unit of risk. Bumi Resources Tbk is currently generating about 0.06 per unit of risk. If you would invest 131,000 in Samindo Resources Tbk on August 28, 2024 and sell it today you would earn a total of 29,000 from holding Samindo Resources Tbk or generate 22.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Samindo Resources Tbk vs. Bumi Resources Tbk
Performance |
| Timeline |
| Samindo Resources Tbk |
| Bumi Resources Tbk |
Samindo Resources and Bumi Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samindo Resources and Bumi Resources
The main advantage of trading using opposite Samindo Resources and Bumi Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samindo Resources 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.The idea behind Samindo Resources Tbk and Bumi Resources Tbk 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.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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