Correlation Between Bumi Resources and PT Bukalapak

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

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

Diversification Opportunities for Bumi Resources and PT Bukalapak

0.28

Correlation Coefficient

Bumi Resources  PT Bukalapak

Modest diversification

The 3 months correlation between Bumi and BUKA is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bumi Resources Minerals and PT Bukalapak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bukalapak and Bumi Resources 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 Bumi Resources Minerals are associated (or correlated) with PT Bukalapak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bukalapak has no effect on the direction of Bumi Resources i.e., Bumi Resources and PT Bukalapak go up and down completely randomly.

Pair Corralation between Bumi Resources and PT Bukalapak

Assuming the 90 days trading horizon Bumi Resources Minerals is expected to generate 1.21 times more return on investment than PT Bukalapak. However, Bumi Resources is 1.21 times more volatile than PT Bukalapak. It trades about 0.07 of its potential returns per unit of risk. PT Bukalapak is currently generating about -0.05 per unit of risk. If you would invest  17,200  in Bumi Resources Minerals on September 4, 2024 and sell it today you would earn a total of  22,600  from holding Bumi Resources Minerals or generate 131.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Bumi Resources Minerals  vs.  PT Bukalapak

Bumi Resources Minerals

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bumi Resources Minerals are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bumi Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

PT Bukalapak

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bukalapak are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Bukalapak may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bumi Resources and PT Bukalapak

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

The idea behind Bumi Resources Minerals and PT Bukalapak 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.