Correlation Between MACOM Technology and PT Bumi

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

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

Diversification Opportunities for MACOM Technology and PT Bumi

0.8

Correlation Coefficient

MACOM Technology  PT Bumi

Very poor diversification

The 3 months correlation between MACOM and PJM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions 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 MACOM Technology 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 MACOM Technology Solutions 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 MACOM Technology i.e., MACOM Technology and PT Bumi go up and down completely randomly.

Pair Corralation between MACOM Technology and PT Bumi

Assuming the 90 days horizon MACOM Technology Solutions is expected to under-perform the PT Bumi. But the stock apears to be less risky and, when comparing its historical volatility, MACOM Technology Solutions is 2.85 times less risky than PT Bumi. The stock trades about -0.11 of its potential returns per unit of risk. The PT Bumi Resources is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.60  in PT Bumi Resources on December 27, 2024 and sell it today you would lose (0.15) from holding PT Bumi Resources or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

MACOM Technology Solutions  vs.  PT Bumi Resources

MACOM Technology Sol

Risk-Adjusted Performance

Very Weak

Over the last 90 days MACOM Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PT Bumi Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bumi Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bumi is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MACOM Technology and PT Bumi

The main advantage of trading using opposite MACOM Technology and PT Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology 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 MACOM Technology Solutions 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.