Correlation Between Bumi Resources and Nusa Konstruksi

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

By analyzing existing cross correlation between Bumi Resources Minerals and Nusa Konstruksi Enjiniring, you can compare the effects of market volatilities on Bumi Resources and Nusa Konstruksi 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 Bumi Resources with a short position of Nusa Konstruksi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bumi Resources and Nusa Konstruksi.

Diversification Opportunities for Bumi Resources and Nusa Konstruksi

-0.66

Correlation Coefficient

Bumi Resources  Nusa Konstruksi

Excellent diversification

The 3 months correlation between Bumi and Nusa is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bumi Resources Minerals and Nusa Konstruksi Enjiniring in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nusa Konstruksi Enji and Bumi Resources 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 Bumi Resources Minerals are associated (or correlated) with Nusa Konstruksi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nusa Konstruksi Enji has no effect on the direction of Bumi Resources i.e., Bumi Resources and Nusa Konstruksi go up and down completely randomly.

Pair Corralation between Bumi Resources and Nusa Konstruksi

Assuming the 90 days trading horizon Bumi Resources Minerals is expected to generate 5.19 times more return on investment than Nusa Konstruksi. However, Bumi Resources is 5.19 times more volatile than Nusa Konstruksi Enjiniring. It trades about 0.01 of its potential returns per unit of risk. Nusa Konstruksi Enjiniring is currently generating about -0.28 per unit of risk. If you would invest  44,000  in Bumi Resources Minerals on September 14, 2024 and sell it today you would lose (200.00) from holding Bumi Resources Minerals or give up 0.45% of portfolio value over 90 days.

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

Bumi Resources Minerals  vs.  Nusa Konstruksi Enjiniring

Bumi Resources Minerals

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bumi Resources Minerals are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bumi Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nusa Konstruksi Enji

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nusa Konstruksi Enjiniring 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.

Pair Trading with Bumi Resources and Nusa Konstruksi

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

The idea behind Bumi Resources Minerals and Nusa Konstruksi Enjiniring 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.