Correlation Between Bumi Resources and Bank Panin

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

Diversification Opportunities for Bumi Resources and Bank Panin

-0.12

Correlation Coefficient

Bumi Resources  Bank Panin

Good diversification

The 3 months correlation between Bumi and Bank is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bumi Resources Minerals and Bank Panin Syariah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Panin Syariah 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 Bank Panin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Panin Syariah has no effect on the direction of Bumi Resources i.e., Bumi Resources and Bank Panin go up and down completely randomly.

Pair Corralation between Bumi Resources and Bank Panin

Assuming the 90 days trading horizon Bumi Resources Minerals is expected to generate 2.15 times more return on investment than Bank Panin. However, Bumi Resources is 2.15 times more volatile than Bank Panin Syariah. It trades about 0.07 of its potential returns per unit of risk. Bank Panin Syariah is currently generating about -0.02 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bumi Resources Minerals  vs.  Bank Panin Syariah

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.

Bank Panin Syariah

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Panin Syariah are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bank Panin 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 Bumi Resources and Bank Panin

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

The idea behind Bumi Resources Minerals and Bank Panin Syariah 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.