Correlation Between Bakrie Sumatera and Energi Mega

Can any of the company-specific risk be diversified away by investing in both Bakrie Sumatera and Energi Mega 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 Bakrie Sumatera and Energi Mega into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bakrie Sumatera Plantations and Energi Mega Persada, you can compare the effects of market volatilities on Bakrie Sumatera and Energi Mega 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 Bakrie Sumatera with a short position of Energi Mega. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Sumatera and Energi Mega.

Diversification Opportunities for Bakrie Sumatera and Energi Mega

0.71

Correlation Coefficient

Bakrie Sumatera  Energi Mega

Poor diversification

The 3 months correlation between Bakrie and Energi is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations and Energi Mega Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energi Mega Persada and Bakrie Sumatera 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 Bakrie Sumatera Plantations are associated (or correlated) with Energi Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energi Mega Persada has no effect on the direction of Bakrie Sumatera i.e., Bakrie Sumatera and Energi Mega go up and down completely randomly.

Pair Corralation between Bakrie Sumatera and Energi Mega

Assuming the 90 days trading horizon Bakrie Sumatera Plantations is expected to generate 0.61 times more return on investment than Energi Mega. However, Bakrie Sumatera Plantations is 1.65 times less risky than Energi Mega. It trades about 0.25 of its potential returns per unit of risk. Energi Mega Persada is currently generating about 0.11 per unit of risk. If you would invest  8,300  in Bakrie Sumatera Plantations on September 13, 2024 and sell it today you would earn a total of  3,900  from holding Bakrie Sumatera Plantations or generate 46.99% return on investment over 90 days.

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

Bakrie Sumatera Plantations  vs.  Energi Mega Persada

Bakrie Sumatera Plan

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bakrie Sumatera Plantations are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bakrie Sumatera disclosed solid returns over the last few months and may actually be approaching a breakup point.

Energi Mega Persada

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energi Mega Persada are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Energi Mega disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bakrie Sumatera and Energi Mega

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

The idea behind Bakrie Sumatera Plantations and Energi Mega Persada 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.