Correlation Between Bayan Resources and Semacom Integrated

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

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

Diversification Opportunities for Bayan Resources and Semacom Integrated

-0.5

Correlation Coefficient

Bayan Resources  Semacom Integrated

Very good diversification

The 3 months correlation between Bayan and Semacom is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bayan Resources Tbk and Semacom Integrated Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semacom Integrated Tbk and Bayan 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 Bayan Resources Tbk are associated (or correlated) with Semacom Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semacom Integrated Tbk has no effect on the direction of Bayan Resources i.e., Bayan Resources and Semacom Integrated go up and down completely randomly.

Pair Corralation between Bayan Resources and Semacom Integrated

Assuming the 90 days trading horizon Bayan Resources is expected to generate 12.06 times less return on investment than Semacom Integrated. But when comparing it to its historical volatility, Bayan Resources Tbk is 6.37 times less risky than Semacom Integrated. It trades about 0.04 of its potential returns per unit of risk. Semacom Integrated Tbk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,600  in Semacom Integrated Tbk on October 10, 2024 and sell it today you would earn a total of  400.00  from holding Semacom Integrated Tbk or generate 4.65% return on investment over 90 days.

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

Bayan Resources Tbk  vs.  Semacom Integrated Tbk

Bayan Resources Tbk

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bayan Resources Tbk are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bayan Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Semacom Integrated Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semacom Integrated Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Semacom Integrated 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 Bayan Resources and Semacom Integrated

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

The idea behind Bayan Resources Tbk and Semacom Integrated Tbk 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..