Correlation Between PT Bumi and Adaro Energy
Can any of the company-specific risk be diversified away by investing in both PT Bumi and Adaro Energy 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 Bumi and Adaro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Bumi Resources and Adaro Energy Tbk, you can compare the effects of market volatilities on PT Bumi and Adaro Energy 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 Bumi with a short position of Adaro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bumi and Adaro Energy.
Diversification Opportunities for PT Bumi and Adaro Energy
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PBMRF and Adaro is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and Adaro Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaro Energy Tbk and PT Bumi 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 Bumi Resources are associated (or correlated) with Adaro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaro Energy Tbk has no effect on the direction of PT Bumi i.e., PT Bumi and Adaro Energy go up and down completely randomly.
Pair Corralation between PT Bumi and Adaro Energy
Assuming the 90 days horizon PT Bumi Resources is expected to generate 3.25 times more return on investment than Adaro Energy. However, PT Bumi is 3.25 times more volatile than Adaro Energy Tbk. It trades about 0.09 of its potential returns per unit of risk. Adaro Energy Tbk is currently generating about 0.08 per unit of risk. If you would invest 0.25 in PT Bumi Resources on November 9, 2024 and sell it today you would earn a total of 0.75 from holding PT Bumi Resources or generate 300.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.15% |
| Values | Daily Returns |
PT Bumi Resources vs. Adaro Energy Tbk
Performance |
| Timeline |
| PT Bumi Resources |
| Adaro Energy Tbk |
PT Bumi and Adaro Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Bumi and Adaro Energy
The main advantage of trading using opposite PT Bumi and Adaro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bumi position performs unexpectedly, Adaro Energy 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 Adaro Energy will offset losses from the drop in Adaro Energy's long position.The idea behind PT Bumi Resources and Adaro Energy 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.| Adaro Energy vs. Thungela Resources Limited | Adaro Energy vs. Geo Energy Resources | Adaro Energy vs. Bukit Asam Tbk | Adaro Energy vs. China Shenhua Energy |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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