Correlation Between Bukit Asam and Timah Persero

Can any of the company-specific risk be diversified away by investing in both Bukit Asam and Timah Persero 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 Bukit Asam and Timah Persero into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bukit Asam Tbk and Timah Persero Tbk, you can compare the effects of market volatilities on Bukit Asam and Timah Persero 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 Bukit Asam with a short position of Timah Persero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bukit Asam and Timah Persero.

Diversification Opportunities for Bukit Asam and Timah Persero

0.3

Correlation Coefficient

Bukit Asam  Timah Persero

Weak diversification

The 3 months correlation between Bukit and Timah is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bukit Asam Tbk and Timah Persero Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timah Persero Tbk and Bukit Asam 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 Bukit Asam Tbk are associated (or correlated) with Timah Persero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timah Persero Tbk has no effect on the direction of Bukit Asam i.e., Bukit Asam and Timah Persero go up and down completely randomly.

Pair Corralation between Bukit Asam and Timah Persero

Assuming the 90 days trading horizon Bukit Asam Tbk is expected to under-perform the Timah Persero. But the stock apears to be less risky and, when comparing its historical volatility, Bukit Asam Tbk is 1.83 times less risky than Timah Persero. The stock trades about -0.03 of its potential returns per unit of risk. The Timah Persero Tbk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  100,000  in Timah Persero Tbk on September 2, 2024 and sell it today you would earn a total of  12,000  from holding Timah Persero Tbk or generate 12.0% return on investment over 90 days.

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

Bukit Asam Tbk  vs.  Timah Persero Tbk

Bukit Asam Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bukit Asam Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bukit Asam is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Timah Persero Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Timah Persero Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Timah Persero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bukit Asam and Timah Persero

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

The idea behind Bukit Asam Tbk and Timah Persero 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.