Correlation Between Bumi Resources and Surya Citra

Can any of the company-specific risk be diversified away by investing in both Bumi Resources and Surya Citra 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 Surya Citra 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 Surya Citra Media, you can compare the effects of market volatilities on Bumi Resources and Surya Citra 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 Surya Citra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bumi Resources and Surya Citra.

Diversification Opportunities for Bumi Resources and Surya Citra

0.61

Correlation Coefficient

Bumi Resources  Surya Citra

Poor diversification

The 3 months correlation between Bumi and Surya is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bumi Resources Minerals and Surya Citra Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surya Citra Media 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 Surya Citra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surya Citra Media has no effect on the direction of Bumi Resources i.e., Bumi Resources and Surya Citra go up and down completely randomly.

Pair Corralation between Bumi Resources and Surya Citra

Assuming the 90 days trading horizon Bumi Resources Minerals is expected to generate 1.4 times more return on investment than Surya Citra. However, Bumi Resources is 1.4 times more volatile than Surya Citra Media. It trades about 0.07 of its potential returns per unit of risk. Surya Citra Media is currently generating about -0.02 per unit of risk. If you would invest  17,200  in Bumi Resources Minerals on September 4, 2024 and sell it today you would earn a total of  22,800  from holding Bumi Resources Minerals or generate 132.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Bumi Resources Minerals  vs.  Surya Citra Media

Bumi Resources Minerals

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bumi Resources Minerals are ranked lower than 21 (%) 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.

Surya Citra Media

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Surya Citra Media are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Surya Citra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bumi Resources and Surya Citra

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

The idea behind Bumi Resources Minerals and Surya Citra Media 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.