Correlation Between Bumi Resources and Indah Prakasa

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

Diversification Opportunities for Bumi Resources and Indah Prakasa

0.22

Correlation Coefficient

Bumi Resources  Indah Prakasa

Modest diversification

The 3 months correlation between Bumi and Indah is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bumi Resources Minerals and Indah Prakasa Sentosa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indah Prakasa Sentosa 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 Indah Prakasa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indah Prakasa Sentosa has no effect on the direction of Bumi Resources i.e., Bumi Resources and Indah Prakasa go up and down completely randomly.

Pair Corralation between Bumi Resources and Indah Prakasa

If you would invest  37,200  in Bumi Resources Minerals on December 4, 2024 and sell it today you would earn a total of  800.00  from holding Bumi Resources Minerals or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Bumi Resources Minerals  vs.  Indah Prakasa Sentosa

Bumi Resources Minerals

Risk-Adjusted Performance

Very Weak

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

Indah Prakasa Sentosa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indah Prakasa Sentosa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 Bumi Resources and Indah Prakasa

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

The idea behind Bumi Resources Minerals and Indah Prakasa Sentosa 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.