Correlation Between PARKEN Sport and PT Bumi

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

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

Diversification Opportunities for PARKEN Sport and PT Bumi

0.63

Correlation Coefficient

PARKEN Sport  PT Bumi

Poor diversification

The 3 months correlation between PARKEN and PJM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PARKEN Sport Entertainment and PT Bumi Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bumi Resources and PARKEN Sport 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 PARKEN Sport Entertainment are associated (or correlated) with PT Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bumi Resources has no effect on the direction of PARKEN Sport i.e., PARKEN Sport and PT Bumi go up and down completely randomly.

Pair Corralation between PARKEN Sport and PT Bumi

Assuming the 90 days horizon PARKEN Sport is expected to generate 5.96 times less return on investment than PT Bumi. But when comparing it to its historical volatility, PARKEN Sport Entertainment is 3.53 times less risky than PT Bumi. It trades about 0.07 of its potential returns per unit of risk. PT Bumi Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.40  in PT Bumi Resources on September 14, 2024 and sell it today you would earn a total of  0.40  from holding PT Bumi Resources or generate 100.0% return on investment over 90 days.

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

PARKEN Sport Entertainment  vs.  PT Bumi Resources

PARKEN Sport Enterta

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PARKEN Sport Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PARKEN Sport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PT Bumi Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Bumi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PARKEN Sport and PT Bumi

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

The idea behind PARKEN Sport Entertainment and PT Bumi Resources 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.