Correlation Between Bayu Buana and Jakarta Setiabudi

Can any of the company-specific risk be diversified away by investing in both Bayu Buana and Jakarta Setiabudi 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 Jakarta Setiabudi 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 Jakarta Setiabudi Internasional, you can compare the effects of market volatilities on Bayu Buana and Jakarta Setiabudi 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 Jakarta Setiabudi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayu Buana and Jakarta Setiabudi.

Diversification Opportunities for Bayu Buana and Jakarta Setiabudi

-0.81

Correlation Coefficient

Bayu Buana  Jakarta Setiabudi

Pay attention - limited upside

The 3 months correlation between Bayu and Jakarta is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bayu Buana Tbk and Jakarta Setiabudi Internasiona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Setiabudi 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 Jakarta Setiabudi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Setiabudi has no effect on the direction of Bayu Buana i.e., Bayu Buana and Jakarta Setiabudi go up and down completely randomly.

Pair Corralation between Bayu Buana and Jakarta Setiabudi

Assuming the 90 days trading horizon Bayu Buana Tbk is expected to generate 0.17 times more return on investment than Jakarta Setiabudi. However, Bayu Buana Tbk is 5.92 times less risky than Jakarta Setiabudi. It trades about -0.03 of its potential returns per unit of risk. Jakarta Setiabudi Internasional is currently generating about -0.09 per unit of risk. If you would invest  137,500  in Bayu Buana Tbk on October 8, 2024 and sell it today you would lose (1,000.00) from holding Bayu Buana Tbk or give up 0.73% of portfolio value over 90 days.

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

Bayu Buana Tbk  vs.  Jakarta Setiabudi Internasiona

Bayu Buana Tbk

Risk-Adjusted Performance

0 of 100

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 quite persistent forward-looking signals, Bayu Buana is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Jakarta Setiabudi

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Setiabudi Internasional are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Setiabudi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayu Buana and Jakarta Setiabudi

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

The idea behind Bayu Buana Tbk and Jakarta Setiabudi Internasional 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.