Correlation Between Bayu Buana and Bintang Oto

Can any of the company-specific risk be diversified away by investing in both Bayu Buana and Bintang Oto 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 Bayu Buana and Bintang Oto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bayu Buana Tbk and Bintang Oto Global, you can compare the effects of market volatilities on Bayu Buana and Bintang Oto 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 Bayu Buana with a short position of Bintang Oto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayu Buana and Bintang Oto.

Diversification Opportunities for Bayu Buana and Bintang Oto

-0.73

Correlation Coefficient

Bayu Buana  Bintang Oto

Pay attention - limited upside

The 3 months correlation between Bayu and Bintang is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bayu Buana Tbk and Bintang Oto Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bintang Oto Global and Bayu Buana 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 Bayu Buana Tbk are associated (or correlated) with Bintang Oto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bintang Oto Global has no effect on the direction of Bayu Buana i.e., Bayu Buana and Bintang Oto go up and down completely randomly.

Pair Corralation between Bayu Buana and Bintang Oto

Assuming the 90 days trading horizon Bayu Buana Tbk is expected to under-perform the Bintang Oto. But the stock apears to be less risky and, when comparing its historical volatility, Bayu Buana Tbk is 2.52 times less risky than Bintang Oto. The stock trades about -0.15 of its potential returns per unit of risk. The Bintang Oto Global is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  52,000  in Bintang Oto Global on December 4, 2024 and sell it today you would earn a total of  14,000  from holding Bintang Oto Global or generate 26.92% return on investment over 90 days.

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

Bayu Buana Tbk  vs.  Bintang Oto Global

Bayu Buana Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bayu Buana Tbk 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.

Bintang Oto Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bintang Oto Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bintang Oto disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayu Buana and Bintang Oto

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

The idea behind Bayu Buana Tbk and Bintang Oto Global 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.