Correlation Between Bhuwanatala Indah and Vale Indonesia

Can any of the company-specific risk be diversified away by investing in both Bhuwanatala Indah and Vale Indonesia 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 Bhuwanatala Indah and Vale Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bhuwanatala Indah Permai and Vale Indonesia Tbk, you can compare the effects of market volatilities on Bhuwanatala Indah and Vale Indonesia 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 Bhuwanatala Indah with a short position of Vale Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bhuwanatala Indah and Vale Indonesia.

Diversification Opportunities for Bhuwanatala Indah and Vale Indonesia

-0.24

Correlation Coefficient

Bhuwanatala Indah  Vale Indonesia

Very good diversification

The 3 months correlation between Bhuwanatala and Vale is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bhuwanatala Indah Permai and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk and Bhuwanatala Indah 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 Bhuwanatala Indah Permai are associated (or correlated) with Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Bhuwanatala Indah i.e., Bhuwanatala Indah and Vale Indonesia go up and down completely randomly.

Pair Corralation between Bhuwanatala Indah and Vale Indonesia

Assuming the 90 days trading horizon Bhuwanatala Indah Permai is expected to generate 1.53 times more return on investment than Vale Indonesia. However, Bhuwanatala Indah is 1.53 times more volatile than Vale Indonesia Tbk. It trades about 0.11 of its potential returns per unit of risk. Vale Indonesia Tbk is currently generating about 0.06 per unit of risk. If you would invest  2,700  in Bhuwanatala Indah Permai on September 15, 2024 and sell it today you would earn a total of  500.00  from holding Bhuwanatala Indah Permai or generate 18.52% return on investment over 90 days.

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

Bhuwanatala Indah Permai  vs.  Vale Indonesia Tbk

Bhuwanatala Indah Permai

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bhuwanatala Indah Permai are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bhuwanatala Indah disclosed solid returns over the last few months and may actually be approaching a breakup point.

Vale Indonesia Tbk

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale Indonesia Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Vale Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bhuwanatala Indah and Vale Indonesia

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

The idea behind Bhuwanatala Indah Permai and Vale Indonesia 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.