Correlation Between PT Bayan and New Hope

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

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

Diversification Opportunities for PT Bayan and New Hope

0.12

Correlation Coefficient

PT Bayan  New Hope

Average diversification

The 3 months correlation between BNB and New is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding PT Bayan Resources and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope and PT Bayan 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 PT Bayan Resources are associated (or correlated) with New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of PT Bayan i.e., PT Bayan and New Hope go up and down completely randomly.

Pair Corralation between PT Bayan and New Hope

Assuming the 90 days horizon PT Bayan Resources is expected to generate 1.14 times more return on investment than New Hope. However, PT Bayan is 1.14 times more volatile than New Hope. It trades about 0.23 of its potential returns per unit of risk. New Hope is currently generating about 0.08 per unit of risk. If you would invest  104.00  in PT Bayan Resources on September 18, 2024 and sell it today you would earn a total of  16.00  from holding PT Bayan Resources or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

PT Bayan Resources  vs.  New Hope

PT Bayan Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bayan Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Bayan reported solid returns over the last few months and may actually be approaching a breakup point.

New Hope

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Hope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bayan and New Hope

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

The idea behind PT Bayan Resources and New Hope 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.