Correlation Between Bakrie Sumatera and Total Bangun

Can any of the company-specific risk be diversified away by investing in both Bakrie Sumatera and Total Bangun 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 Total Bangun 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 Total Bangun Persada, you can compare the effects of market volatilities on Bakrie Sumatera and Total Bangun 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 Total Bangun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Sumatera and Total Bangun.

Diversification Opportunities for Bakrie Sumatera and Total Bangun

0.72

Correlation Coefficient

Bakrie Sumatera  Total Bangun

Poor diversification

The 3 months correlation between Bakrie and Total is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations and Total Bangun Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Bangun 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 Total Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Bangun Persada has no effect on the direction of Bakrie Sumatera i.e., Bakrie Sumatera and Total Bangun go up and down completely randomly.

Pair Corralation between Bakrie Sumatera and Total Bangun

Assuming the 90 days trading horizon Bakrie Sumatera Plantations is expected to under-perform the Total Bangun. But the stock apears to be less risky and, when comparing its historical volatility, Bakrie Sumatera Plantations is 1.44 times less risky than Total Bangun. The stock trades about -0.32 of its potential returns per unit of risk. The Total Bangun Persada is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  71,000  in Total Bangun Persada on September 14, 2024 and sell it today you would earn a total of  500.00  from holding Total Bangun Persada or generate 0.7% 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.  Total Bangun Persada

Bakrie Sumatera Plan

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bakrie Sumatera Plantations are ranked lower than 18 (%) 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.

Total Bangun Persada

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Bakrie Sumatera and Total Bangun

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

The idea behind Bakrie Sumatera Plantations and Total Bangun 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.