Correlation Between Tunas Baru and Bisi International

Can any of the company-specific risk be diversified away by investing in both Tunas Baru and Bisi International 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 Tunas Baru and Bisi International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tunas Baru Lampung and Bisi International Tbk, you can compare the effects of market volatilities on Tunas Baru and Bisi International 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 Tunas Baru with a short position of Bisi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tunas Baru and Bisi International.

Diversification Opportunities for Tunas Baru and Bisi International

-0.54

Correlation Coefficient

Tunas Baru  Bisi International

Excellent diversification

The 3 months correlation between Tunas and Bisi is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tunas Baru Lampung and Bisi International Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bisi International Tbk and Tunas Baru 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 Tunas Baru Lampung are associated (or correlated) with Bisi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bisi International Tbk has no effect on the direction of Tunas Baru i.e., Tunas Baru and Bisi International go up and down completely randomly.

Pair Corralation between Tunas Baru and Bisi International

Assuming the 90 days trading horizon Tunas Baru Lampung is expected to under-perform the Bisi International. But the stock apears to be less risky and, when comparing its historical volatility, Tunas Baru Lampung is 2.29 times less risky than Bisi International. The stock trades about -0.19 of its potential returns per unit of risk. The Bisi International Tbk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  109,500  in Bisi International Tbk on September 13, 2024 and sell it today you would lose (500.00) from holding Bisi International Tbk or give up 0.46% of portfolio value over 90 days.

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

Tunas Baru Lampung  vs.  Bisi International Tbk

Tunas Baru Lampung

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tunas Baru Lampung are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Tunas Baru is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bisi International Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bisi International Tbk 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.

Pair Trading with Tunas Baru and Bisi International

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

The idea behind Tunas Baru Lampung and Bisi International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.