Correlation Between Langgeng Makmur and Bumi Teknokultura

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

By analyzing existing cross correlation between Langgeng Makmur Industri and Bumi Teknokultura Unggul, you can compare the effects of market volatilities on Langgeng Makmur and Bumi Teknokultura 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 Langgeng Makmur with a short position of Bumi Teknokultura. Check out your portfolio center. Please also check ongoing floating volatility patterns of Langgeng Makmur and Bumi Teknokultura.

Diversification Opportunities for Langgeng Makmur and Bumi Teknokultura

-0.15

Correlation Coefficient

Langgeng Makmur  Bumi Teknokultura

Good diversification

The 3 months correlation between Langgeng and Bumi is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Langgeng Makmur Industri and Bumi Teknokultura Unggul in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Teknokultura Unggul and Langgeng Makmur 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 Langgeng Makmur Industri are associated (or correlated) with Bumi Teknokultura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Teknokultura Unggul has no effect on the direction of Langgeng Makmur i.e., Langgeng Makmur and Bumi Teknokultura go up and down completely randomly.

Pair Corralation between Langgeng Makmur and Bumi Teknokultura

Assuming the 90 days trading horizon Langgeng Makmur is expected to generate 4.15 times less return on investment than Bumi Teknokultura. But when comparing it to its historical volatility, Langgeng Makmur Industri is 3.39 times less risky than Bumi Teknokultura. It trades about 0.02 of its potential returns per unit of risk. Bumi Teknokultura Unggul is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,000  in Bumi Teknokultura Unggul on October 10, 2024 and sell it today you would lose (4,700) from holding Bumi Teknokultura Unggul or give up 94.0% of portfolio value over 90 days.

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

Langgeng Makmur Industri  vs.  Bumi Teknokultura Unggul

Langgeng Makmur Industri

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Langgeng Makmur Industri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Langgeng Makmur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bumi Teknokultura Unggul

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bumi Teknokultura Unggul are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bumi Teknokultura disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Langgeng Makmur and Bumi Teknokultura

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

The idea behind Langgeng Makmur Industri and Bumi Teknokultura Unggul 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.