Correlation Between Bukit Asam and PT Bumi
Can any of the company-specific risk be diversified away by investing in both Bukit Asam 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 Bukit Asam and PT Bumi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bukit Asam Tbk and PT Bumi Resources, you can compare the effects of market volatilities on Bukit Asam 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 Bukit Asam with a short position of PT Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bukit Asam and PT Bumi.
Diversification Opportunities for Bukit Asam and PT Bumi
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bukit and PBMRF is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bukit Asam Tbk 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 Bukit Asam 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 Bukit Asam Tbk 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 Bukit Asam i.e., Bukit Asam and PT Bumi go up and down completely randomly.
Pair Corralation between Bukit Asam and PT Bumi
Assuming the 90 days horizon Bukit Asam is expected to generate 4.75 times less return on investment than PT Bumi. But when comparing it to its historical volatility, Bukit Asam Tbk is 6.18 times less risky than PT Bumi. It trades about 0.06 of its potential returns per unit of risk. PT Bumi Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1.00 in PT Bumi Resources on September 1, 2024 and sell it today you would lose (0.40) from holding PT Bumi Resources or give up 40.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 82.54% |
| Values | Daily Returns |
Bukit Asam Tbk vs. PT Bumi Resources
Performance |
| Timeline |
| Bukit Asam Tbk |
| PT Bumi Resources |
Bukit Asam and PT Bumi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bukit Asam and PT Bumi
The main advantage of trading using opposite Bukit Asam and PT Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bukit Asam 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.The idea behind Bukit Asam Tbk and PT Bumi Resources 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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