Correlation Between Bumi Serpong and Duta Pertiwi

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

By analyzing existing cross correlation between Bumi Serpong Damai and Duta Pertiwi Tbk, you can compare the effects of market volatilities on Bumi Serpong and Duta Pertiwi 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 Serpong with a short position of Duta Pertiwi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bumi Serpong and Duta Pertiwi.

Diversification Opportunities for Bumi Serpong and Duta Pertiwi

-0.33

Correlation Coefficient

Bumi Serpong  Duta Pertiwi

Very good diversification

The 3 months correlation between Bumi and Duta is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bumi Serpong Damai and Duta Pertiwi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duta Pertiwi Tbk and Bumi Serpong 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 Serpong Damai are associated (or correlated) with Duta Pertiwi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duta Pertiwi Tbk has no effect on the direction of Bumi Serpong i.e., Bumi Serpong and Duta Pertiwi go up and down completely randomly.

Pair Corralation between Bumi Serpong and Duta Pertiwi

Assuming the 90 days trading horizon Bumi Serpong Damai is expected to under-perform the Duta Pertiwi. But the stock apears to be less risky and, when comparing its historical volatility, Bumi Serpong Damai is 1.22 times less risky than Duta Pertiwi. The stock trades about -0.11 of its potential returns per unit of risk. The Duta Pertiwi Tbk is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  399,000  in Duta Pertiwi Tbk on September 13, 2024 and sell it today you would earn a total of  95,000  from holding Duta Pertiwi Tbk or generate 23.81% return on investment over 90 days.

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

Bumi Serpong Damai  vs.  Duta Pertiwi Tbk

Bumi Serpong Damai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bumi Serpong Damai has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Duta Pertiwi Tbk

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duta Pertiwi Tbk are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Duta Pertiwi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bumi Serpong and Duta Pertiwi

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

The idea behind Bumi Serpong Damai and Duta Pertiwi 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.