Correlation Between Benakat Petroleum and Resource Alam

Can any of the company-specific risk be diversified away by investing in both Benakat Petroleum 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 Benakat Petroleum and Resource Alam into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Benakat Petroleum Energy and Resource Alam Indonesia, you can compare the effects of market volatilities on Benakat Petroleum 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 Benakat Petroleum with a short position of Resource Alam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benakat Petroleum and Resource Alam.

Diversification Opportunities for Benakat Petroleum and Resource Alam

-0.58

Correlation Coefficient

Benakat Petroleum  Resource Alam

Excellent diversification

The 3 months correlation between Benakat and Resource is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Benakat Petroleum Energy 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 Benakat Petroleum 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 Benakat Petroleum Energy 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 Benakat Petroleum i.e., Benakat Petroleum and Resource Alam go up and down completely randomly.

Pair Corralation between Benakat Petroleum and Resource Alam

Assuming the 90 days trading horizon Benakat Petroleum Energy is expected to generate 2.57 times more return on investment than Resource Alam. However, Benakat Petroleum is 2.57 times more volatile than Resource Alam Indonesia. It trades about 0.15 of its potential returns per unit of risk. Resource Alam Indonesia is currently generating about -0.04 per unit of risk. If you would invest  6,200  in Benakat Petroleum Energy on September 16, 2024 and sell it today you would earn a total of  3,100  from holding Benakat Petroleum Energy or generate 50.0% return on investment over 90 days.

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

Benakat Petroleum Energy  vs.  Resource Alam Indonesia

Benakat Petroleum Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Benakat Petroleum Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Benakat Petroleum disclosed solid returns over the last few months and may actually be approaching a breakup point.

Resource Alam Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resource Alam Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Resource Alam is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Benakat Petroleum and Resource Alam

The main advantage of trading using opposite Benakat Petroleum and Resource Alam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benakat Petroleum 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 Benakat Petroleum Energy 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.