Correlation Between Alphabet and Bumi Resources

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

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

Diversification Opportunities for Alphabet and Bumi Resources

0.34

Correlation Coefficient

Alphabet  Bumi Resources

Weak diversification

The 3 months correlation between Alphabet and Bumi is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Bumi Resources Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Resources Minerals and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Bumi Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Resources Minerals has no effect on the direction of Alphabet i.e., Alphabet and Bumi Resources go up and down completely randomly.

Pair Corralation between Alphabet and Bumi Resources

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Bumi Resources. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 2.43 times less risky than Bumi Resources. The stock trades about -0.12 of its potential returns per unit of risk. The Bumi Resources Minerals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  34,600  in Bumi Resources Minerals on December 29, 2024 and sell it today you would lose (1,400) from holding Bumi Resources Minerals or give up 4.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Alphabet Inc Class C  vs.  Bumi Resources Minerals

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Alphabet and Bumi Resources

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

The idea behind Alphabet Inc Class C and Bumi Resources Minerals 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.