Correlation Between Bakrie Brothers and Medco Energi

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

Diversification Opportunities for Bakrie Brothers and Medco Energi

0.6

Correlation Coefficient

Bakrie Brothers  Medco Energi

Poor diversification

The 3 months correlation between Bakrie and Medco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Brothers Tbk and Medco Energi Internasional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Energi Interna 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 Medco Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medco Energi Interna has no effect on the direction of Bakrie Brothers i.e., Bakrie Brothers and Medco Energi go up and down completely randomly.

Pair Corralation between Bakrie Brothers and Medco Energi

Assuming the 90 days trading horizon Bakrie Brothers Tbk is expected to under-perform the Medco Energi. In addition to that, Bakrie Brothers is 1.91 times more volatile than Medco Energi Internasional. It trades about -0.04 of its total potential returns per unit of risk. Medco Energi Internasional is currently generating about -0.04 per unit of volatility. If you would invest  110,000  in Medco Energi Internasional on December 30, 2024 and sell it today you would lose (7,500) from holding Medco Energi Internasional or give up 6.82% of portfolio value over 90 days.

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

Bakrie Brothers Tbk  vs.  Medco Energi Internasional

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 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.

Medco Energi Interna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medco Energi Internasional has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Medco Energi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bakrie Brothers and Medco Energi

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

The idea behind Bakrie Brothers Tbk and Medco Energi 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.