Correlation Between Makmur Berkah and Bumi Benowo

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

By analyzing existing cross correlation between Makmur Berkah Amanda and Bumi Benowo Sukses, you can compare the effects of market volatilities on Makmur Berkah and Bumi Benowo 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 Makmur Berkah with a short position of Bumi Benowo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Makmur Berkah and Bumi Benowo.

Diversification Opportunities for Makmur Berkah and Bumi Benowo

0.5

Correlation Coefficient

Makmur Berkah  Bumi Benowo

Very weak diversification

The 3 months correlation between Makmur and Bumi is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Makmur Berkah Amanda and Bumi Benowo Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Benowo Sukses and Makmur Berkah 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 Makmur Berkah Amanda are associated (or correlated) with Bumi Benowo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Benowo Sukses has no effect on the direction of Makmur Berkah i.e., Makmur Berkah and Bumi Benowo go up and down completely randomly.

Pair Corralation between Makmur Berkah and Bumi Benowo

Assuming the 90 days trading horizon Makmur Berkah Amanda is expected to under-perform the Bumi Benowo. But the stock apears to be less risky and, when comparing its historical volatility, Makmur Berkah Amanda is 5.66 times less risky than Bumi Benowo. The stock trades about -0.08 of its potential returns per unit of risk. The Bumi Benowo Sukses is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17,000  in Bumi Benowo Sukses on October 27, 2024 and sell it today you would earn a total of  0.00  from holding Bumi Benowo Sukses or generate 0.0% return on investment over 90 days.

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

Makmur Berkah Amanda  vs.  Bumi Benowo Sukses

Makmur Berkah Amanda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Makmur Berkah Amanda has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bumi Benowo Sukses

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bumi Benowo Sukses 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Makmur Berkah and Bumi Benowo

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

The idea behind Makmur Berkah Amanda and Bumi Benowo Sukses 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.