Correlation Between TRAVEL + and PT Bumi

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and PT Bumi Resources, you can compare the effects of market volatilities on TRAVEL + and PT Bumi 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 TRAVEL + with a short position of PT Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and PT Bumi.

Diversification Opportunities for TRAVEL + and PT Bumi

0.78

Correlation Coefficient

TRAVEL +  PT Bumi

Poor diversification

The 3 months correlation between TRAVEL and PJM is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and PT Bumi Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bumi Resources and TRAVEL + 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 TRAVEL LEISURE DL 01 are associated (or correlated) with PT Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bumi Resources has no effect on the direction of TRAVEL + i.e., TRAVEL + and PT Bumi go up and down completely randomly.

Pair Corralation between TRAVEL + and PT Bumi

Assuming the 90 days trading horizon TRAVEL + is expected to generate 1.94 times less return on investment than PT Bumi. But when comparing it to its historical volatility, TRAVEL LEISURE DL 01 is 3.65 times less risky than PT Bumi. It trades about 0.28 of its potential returns per unit of risk. PT Bumi Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.50  in PT Bumi Resources on September 3, 2024 and sell it today you would earn a total of  0.30  from holding PT Bumi Resources or generate 60.0% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  PT Bumi Resources

TRAVEL LEISURE DL

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

PT Bumi Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PT Bumi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVEL + and PT Bumi

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

The idea behind TRAVEL LEISURE DL 01 and PT Bumi Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.