Correlation Between Bakrie Sumatera and Resource Alam
Can any of the company-specific risk be diversified away by investing in both Bakrie Sumatera and Resource Alam 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 Resource Alam 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 Resource Alam Indonesia, you can compare the effects of market volatilities on Bakrie Sumatera and Resource Alam 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 Resource Alam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Sumatera and Resource Alam.
Diversification Opportunities for Bakrie Sumatera and Resource Alam
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bakrie and Resource is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations and Resource Alam Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Alam Indonesia 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 Resource Alam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Alam Indonesia has no effect on the direction of Bakrie Sumatera i.e., Bakrie Sumatera and Resource Alam go up and down completely randomly.
Pair Corralation between Bakrie Sumatera and Resource Alam
Assuming the 90 days trading horizon Bakrie Sumatera is expected to generate 1.84 times less return on investment than Resource Alam. But when comparing it to its historical volatility, Bakrie Sumatera Plantations is 1.4 times less risky than Resource Alam. It trades about 0.03 of its potential returns per unit of risk. Resource Alam Indonesia is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 37,962 in Resource Alam Indonesia on August 27, 2024 and sell it today you would earn a total of 14,538 from holding Resource Alam Indonesia or generate 38.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bakrie Sumatera Plantations vs. Resource Alam Indonesia
Performance |
| Timeline |
| Bakrie Sumatera Plan |
| Resource Alam Indonesia |
Bakrie Sumatera and Resource Alam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bakrie Sumatera and Resource Alam
The main advantage of trading using opposite Bakrie Sumatera and Resource Alam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bakrie Sumatera position performs unexpectedly, Resource Alam 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 Resource Alam will offset losses from the drop in Resource Alam's long position.The idea behind Bakrie Sumatera Plantations and Resource Alam Indonesia 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.| Resource Alam vs. Petrosea Tbk | Resource Alam vs. Harum Energy Tbk | Resource Alam vs. Perdana Karya Perkasa | Resource Alam vs. Bayan 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 Valuation module to check real value of public entities based on technical and fundamental data.
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