Correlation Between Sumber Alfaria and Bayan Resources

Can any of the company-specific risk be diversified away by investing in both Sumber Alfaria and Bayan 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 Sumber Alfaria and Bayan Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sumber Alfaria Trijaya and Bayan Resources Tbk, you can compare the effects of market volatilities on Sumber Alfaria and Bayan 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 Sumber Alfaria with a short position of Bayan Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumber Alfaria and Bayan Resources.

Diversification Opportunities for Sumber Alfaria and Bayan Resources

-0.67

Correlation Coefficient

Sumber Alfaria  Bayan Resources

Excellent diversification

The 3 months correlation between Sumber and Bayan is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sumber Alfaria Trijaya and Bayan Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayan Resources Tbk and Sumber Alfaria 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 Sumber Alfaria Trijaya are associated (or correlated) with Bayan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayan Resources Tbk has no effect on the direction of Sumber Alfaria i.e., Sumber Alfaria and Bayan Resources go up and down completely randomly.

Pair Corralation between Sumber Alfaria and Bayan Resources

Assuming the 90 days trading horizon Sumber Alfaria Trijaya is expected to generate 0.87 times more return on investment than Bayan Resources. However, Sumber Alfaria Trijaya is 1.15 times less risky than Bayan Resources. It trades about 0.02 of its potential returns per unit of risk. Bayan Resources Tbk is currently generating about 0.01 per unit of risk. If you would invest  260,057  in Sumber Alfaria Trijaya on September 20, 2024 and sell it today you would earn a total of  20,943  from holding Sumber Alfaria Trijaya or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sumber Alfaria Trijaya  vs.  Bayan Resources Tbk

Sumber Alfaria Trijaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumber Alfaria Trijaya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bayan Resources Tbk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bayan Resources Tbk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bayan Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumber Alfaria and Bayan Resources

The main advantage of trading using opposite Sumber Alfaria and Bayan Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumber Alfaria position performs unexpectedly, Bayan 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 Bayan Resources will offset losses from the drop in Bayan Resources' long position.

The idea behind Sumber Alfaria Trijaya and Bayan Resources 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.