Correlation Between Aneka Tambang and Bumi Resources

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

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

Diversification Opportunities for Aneka Tambang and Bumi Resources

-0.51

Correlation Coefficient

Aneka Tambang  Bumi Resources

Excellent diversification

The 3 months correlation between Aneka and Bumi is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Persero and Bumi Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Resources Tbk and Aneka Tambang 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 Aneka Tambang Persero are associated (or correlated) with Bumi Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Resources Tbk has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Bumi Resources go up and down completely randomly.

Pair Corralation between Aneka Tambang and Bumi Resources

Assuming the 90 days trading horizon Aneka Tambang Persero is expected to generate 0.68 times more return on investment than Bumi Resources. However, Aneka Tambang Persero is 1.47 times less risky than Bumi Resources. It trades about 0.06 of its potential returns per unit of risk. Bumi Resources Tbk is currently generating about -0.08 per unit of risk. If you would invest  152,500  in Aneka Tambang Persero on December 30, 2024 and sell it today you would earn a total of  11,000  from holding Aneka Tambang Persero or generate 7.21% return on investment over 90 days.

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

Aneka Tambang Persero  vs.  Bumi Resources Tbk

Aneka Tambang Persero

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aneka Tambang Persero are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Aneka Tambang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bumi Resources Tbk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aneka Tambang and Bumi Resources

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

The idea behind Aneka Tambang Persero and Bumi Resources Tbk 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.