Correlation Between Bakrie Brothers and Bakrie Sumatera

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

Diversification Opportunities for Bakrie Brothers and Bakrie Sumatera

0.24

Correlation Coefficient

Bakrie Brothers  Bakrie Sumatera

Modest diversification

The 3 months correlation between Bakrie and Bakrie is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Brothers Tbk and Bakrie Sumatera Plantations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrie Sumatera Plan 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 Bakrie Sumatera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrie Sumatera Plan has no effect on the direction of Bakrie Brothers i.e., Bakrie Brothers and Bakrie Sumatera go up and down completely randomly.

Pair Corralation between Bakrie Brothers and Bakrie Sumatera

Assuming the 90 days trading horizon Bakrie Brothers Tbk is expected to under-perform the Bakrie Sumatera. In addition to that, Bakrie Brothers is 1.12 times more volatile than Bakrie Sumatera Plantations. It trades about -0.04 of its total potential returns per unit of risk. Bakrie Sumatera Plantations is currently generating about 0.01 per unit of volatility. If you would invest  9,700  in Bakrie Sumatera Plantations on December 30, 2024 and sell it today you would lose (200.00) from holding Bakrie Sumatera Plantations or give up 2.06% of portfolio value over 90 days.

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

Bakrie Brothers Tbk  vs.  Bakrie Sumatera Plantations

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.

Bakrie Sumatera Plan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakrie Sumatera Plantations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bakrie Sumatera 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 Bakrie Sumatera

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

The idea behind Bakrie Brothers Tbk and Bakrie Sumatera Plantations 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.