Correlation Between NGL Energy and PT Bumi
Can any of the company-specific risk be diversified away by investing in both NGL Energy 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 NGL Energy and PT Bumi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NGL Energy Partners and PT Bumi Resources, you can compare the effects of market volatilities on NGL Energy 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 NGL Energy with a short position of PT Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and PT Bumi.
Diversification Opportunities for NGL Energy and PT Bumi
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NGL and PBMRF is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners 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 NGL Energy 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 NGL Energy Partners 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 NGL Energy i.e., NGL Energy and PT Bumi go up and down completely randomly.
Pair Corralation between NGL Energy and PT Bumi
Considering the 90-day investment horizon NGL Energy is expected to generate 12.64 times less return on investment than PT Bumi. But when comparing it to its historical volatility, NGL Energy Partners is 13.7 times less risky than PT Bumi. It trades about 0.23 of its potential returns per unit of risk. PT Bumi Resources is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.21 in PT Bumi Resources on October 20, 2024 and sell it today you would earn a total of 0.30 from holding PT Bumi Resources or generate 142.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
NGL Energy Partners vs. PT Bumi Resources
Performance |
| Timeline |
| NGL Energy Partners |
| PT Bumi Resources |
NGL Energy and PT Bumi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGL Energy and PT Bumi
The main advantage of trading using opposite NGL Energy and PT Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy 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.| NGL Energy vs. NGL Energy Partners | NGL Energy vs. Dynagas LNG Partners | NGL Energy vs. Martin Midstream Partners | NGL Energy vs. Kinetik Holdings |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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