Correlation Between Bakrie Sumatera and Bumi Resources
Can any of the company-specific risk be diversified away by investing in both Bakrie Sumatera 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 Bakrie Sumatera and Bumi Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bakrie Sumatera Plantations and Bumi Resources Tbk, you can compare the effects of market volatilities on Bakrie Sumatera 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 Bakrie Sumatera with a short position of Bumi Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Sumatera and Bumi Resources.
Diversification Opportunities for Bakrie Sumatera and Bumi Resources
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bakrie and Bumi is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations 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 Bakrie Sumatera 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 Bakrie Sumatera Plantations 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 Bakrie Sumatera i.e., Bakrie Sumatera and Bumi Resources go up and down completely randomly.
Pair Corralation between Bakrie Sumatera and Bumi Resources
Assuming the 90 days trading horizon Bakrie Sumatera Plantations is expected to generate 0.5 times more return on investment than Bumi Resources. However, Bakrie Sumatera Plantations is 1.99 times less risky than Bumi Resources. It trades about 0.33 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 10,400 in Bakrie Sumatera Plantations on August 24, 2024 and sell it today you would earn a total of 2,500 from holding Bakrie Sumatera Plantations or generate 24.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bakrie Sumatera Plantations vs. Bumi Resources Tbk
Performance |
| Timeline |
| Bakrie Sumatera Plan |
| Bumi Resources Tbk |
Bakrie Sumatera and Bumi Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bakrie Sumatera and Bumi Resources
The main advantage of trading using opposite Bakrie Sumatera and Bumi Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bakrie Sumatera 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.| Bakrie Sumatera vs. Bakrieland Development Tbk | Bakrie Sumatera vs. Bakrie Brothers Tbk | Bakrie Sumatera vs. Energi Mega Persada | Bakrie Sumatera vs. Sampoerna Agro 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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