Correlation Between PT Dewi and Bumi Benowo

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

By analyzing existing cross correlation between PT Dewi Shri and Bumi Benowo Sukses, you can compare the effects of market volatilities on PT Dewi and Bumi Benowo 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 Dewi with a short position of Bumi Benowo. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Dewi and Bumi Benowo.

Diversification Opportunities for PT Dewi and Bumi Benowo

0.42

Correlation Coefficient

PT Dewi  Bumi Benowo

Very weak diversification

The 3 months correlation between DEWI and Bumi is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PT Dewi Shri and Bumi Benowo Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Benowo Sukses and PT Dewi 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 Dewi Shri are associated (or correlated) with Bumi Benowo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Benowo Sukses has no effect on the direction of PT Dewi i.e., PT Dewi and Bumi Benowo go up and down completely randomly.

Pair Corralation between PT Dewi and Bumi Benowo

Assuming the 90 days trading horizon PT Dewi Shri is expected to under-perform the Bumi Benowo. But the stock apears to be less risky and, when comparing its historical volatility, PT Dewi Shri is 1.15 times less risky than Bumi Benowo. The stock trades about -0.02 of its potential returns per unit of risk. The Bumi Benowo Sukses is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,600  in Bumi Benowo Sukses on September 14, 2024 and sell it today you would earn a total of  13,400  from holding Bumi Benowo Sukses or generate 203.03% return on investment over 90 days.

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

PT Dewi Shri  vs.  Bumi Benowo Sukses

PT Dewi Shri

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Dewi Shri are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Dewi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bumi Benowo Sukses

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bumi Benowo Sukses are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bumi Benowo is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PT Dewi and Bumi Benowo

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

The idea behind PT Dewi Shri and Bumi Benowo Sukses 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.