Correlation Between PT Bumi and GAMING FAC

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

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

Diversification Opportunities for PT Bumi and GAMING FAC

-0.82

Correlation Coefficient

PT Bumi  GAMING FAC

Pay attention - limited upside

The 3 months correlation between PJM and GAMING is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and GAMING FAC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMING FAC SA and PT Bumi 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 Bumi Resources are associated (or correlated) with GAMING FAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMING FAC SA has no effect on the direction of PT Bumi i.e., PT Bumi and GAMING FAC go up and down completely randomly.

Pair Corralation between PT Bumi and GAMING FAC

Assuming the 90 days horizon PT Bumi Resources is expected to generate 1.87 times more return on investment than GAMING FAC. However, PT Bumi is 1.87 times more volatile than GAMING FAC SA. It trades about 0.05 of its potential returns per unit of risk. GAMING FAC SA is currently generating about 0.03 per unit of risk. If you would invest  0.60  in PT Bumi Resources on September 1, 2024 and sell it today you would earn a total of  0.20  from holding PT Bumi Resources or generate 33.33% return on investment over 90 days.

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

PT Bumi Resources  vs.  GAMING FAC SA

PT Bumi Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Bumi reported solid returns over the last few months and may actually be approaching a breakup point.

GAMING FAC SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMING FAC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Bumi and GAMING FAC

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

The idea behind PT Bumi Resources and GAMING FAC SA 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.