Correlation Between Bank Bumi and Bank Maspion

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

By analyzing existing cross correlation between Bank Bumi Arta and Bank Maspion Indonesia, you can compare the effects of market volatilities on Bank Bumi and Bank Maspion 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 Bank Bumi with a short position of Bank Maspion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Bumi and Bank Maspion.

Diversification Opportunities for Bank Bumi and Bank Maspion

0.66

Correlation Coefficient

Bank Bumi  Bank Maspion

Poor diversification

The 3 months correlation between Bank and Bank is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank Bumi Arta and Bank Maspion Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Maspion Indonesia and Bank Bumi 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 Bank Bumi Arta are associated (or correlated) with Bank Maspion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Maspion Indonesia has no effect on the direction of Bank Bumi i.e., Bank Bumi and Bank Maspion go up and down completely randomly.

Pair Corralation between Bank Bumi and Bank Maspion

Assuming the 90 days trading horizon Bank Bumi Arta is expected to generate 1.19 times more return on investment than Bank Maspion. However, Bank Bumi is 1.19 times more volatile than Bank Maspion Indonesia. It trades about -0.12 of its potential returns per unit of risk. Bank Maspion Indonesia is currently generating about -0.27 per unit of risk. If you would invest  60,000  in Bank Bumi Arta on December 29, 2024 and sell it today you would lose (7,500) from holding Bank Bumi Arta or give up 12.5% of portfolio value over 90 days.

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

Bank Bumi Arta  vs.  Bank Maspion Indonesia

Bank Bumi Arta

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Bumi Arta 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.

Bank Maspion Indonesia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Maspion Indonesia 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 Bank Bumi and Bank Maspion

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

The idea behind Bank Bumi Arta and Bank Maspion Indonesia 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.