Correlation Between Hanjaya Mandala and Bumi Resources

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

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

Diversification Opportunities for Hanjaya Mandala and Bumi Resources

0.51

Correlation Coefficient

Hanjaya Mandala  Bumi Resources

Very weak diversification

The 3 months correlation between Hanjaya and Bumi is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hanjaya Mandala Sampoerna 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 Hanjaya Mandala 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 Hanjaya Mandala Sampoerna 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 Hanjaya Mandala i.e., Hanjaya Mandala and Bumi Resources go up and down completely randomly.

Pair Corralation between Hanjaya Mandala and Bumi Resources

Assuming the 90 days trading horizon Hanjaya Mandala Sampoerna is expected to under-perform the Bumi Resources. But the stock apears to be less risky and, when comparing its historical volatility, Hanjaya Mandala Sampoerna is 4.6 times less risky than Bumi Resources. The stock trades about -0.24 of its potential returns per unit of risk. The Bumi Resources Minerals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  39,600  in Bumi Resources Minerals on November 27, 2024 and sell it today you would earn a total of  800.00  from holding Bumi Resources Minerals or generate 2.02% return on investment over 90 days.

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

Hanjaya Mandala Sampoerna  vs.  Bumi Resources Minerals

Hanjaya Mandala Sampoerna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanjaya Mandala Sampoerna 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 forward-looking signals remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bumi Resources Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bumi Resources Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bumi Resources may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Hanjaya Mandala and Bumi Resources

The main advantage of trading using opposite Hanjaya Mandala and Bumi Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanjaya Mandala 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 Hanjaya Mandala Sampoerna 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.