Correlation Between Bakrie Brothers and Bakrieland Development

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

By analyzing existing cross correlation between Bakrie Brothers Tbk and Bakrieland Development Tbk, you can compare the effects of market volatilities on Bakrie Brothers and Bakrieland Development 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 Bakrie Brothers with a short position of Bakrieland Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Brothers and Bakrieland Development.

Diversification Opportunities for Bakrie Brothers and Bakrieland Development

0.53

Correlation Coefficient

Bakrie Brothers  Bakrieland Development

Very weak diversification

The 3 months correlation between Bakrie and Bakrieland is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Brothers Tbk and Bakrieland Development Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrieland Development and Bakrie Brothers 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 Bakrie Brothers Tbk are associated (or correlated) with Bakrieland Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrieland Development has no effect on the direction of Bakrie Brothers i.e., Bakrie Brothers and Bakrieland Development go up and down completely randomly.

Pair Corralation between Bakrie Brothers and Bakrieland Development

Assuming the 90 days trading horizon Bakrie Brothers Tbk is expected to under-perform the Bakrieland Development. But the stock apears to be less risky and, when comparing its historical volatility, Bakrie Brothers Tbk is 1.2 times less risky than Bakrieland Development. The stock trades about -0.13 of its potential returns per unit of risk. The Bakrieland Development Tbk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Bakrieland Development Tbk on November 29, 2024 and sell it today you would earn a total of  0.00  from holding Bakrieland Development Tbk 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

Bakrie Brothers Tbk  vs.  Bakrieland Development Tbk

Bakrie Brothers Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakrie Brothers 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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bakrieland Development

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bakrieland Development Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bakrieland Development may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Bakrie Brothers and Bakrieland Development

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

The idea behind Bakrie Brothers Tbk and Bakrieland Development 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.