Correlation Between Medco Energi and Bakrie Brothers

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

By analyzing existing cross correlation between Medco Energi Internasional and Bakrie Brothers Tbk, you can compare the effects of market volatilities on Medco Energi and Bakrie Brothers 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 Medco Energi with a short position of Bakrie Brothers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medco Energi and Bakrie Brothers.

Diversification Opportunities for Medco Energi and Bakrie Brothers

0.28

Correlation Coefficient

Medco Energi  Bakrie Brothers

Modest diversification

The 3 months correlation between Medco and Bakrie is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Medco Energi Internasional and Bakrie Brothers Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrie Brothers Tbk and Medco Energi 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 Medco Energi Internasional are associated (or correlated) with Bakrie Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrie Brothers Tbk has no effect on the direction of Medco Energi i.e., Medco Energi and Bakrie Brothers go up and down completely randomly.

Pair Corralation between Medco Energi and Bakrie Brothers

Assuming the 90 days trading horizon Medco Energi Internasional is expected to generate 0.56 times more return on investment than Bakrie Brothers. However, Medco Energi Internasional is 1.8 times less risky than Bakrie Brothers. It trades about -0.03 of its potential returns per unit of risk. Bakrie Brothers Tbk is currently generating about -0.13 per unit of risk. If you would invest  109,000  in Medco Energi Internasional on November 29, 2024 and sell it today you would lose (6,000) from holding Medco Energi Internasional or give up 5.5% of portfolio value over 90 days.

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

Medco Energi Internasional  vs.  Bakrie Brothers Tbk

Medco Energi Interna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medco Energi Internasional has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Medco Energi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bakrie Brothers Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakrie Brothers Tbk 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.

Pair Trading with Medco Energi and Bakrie Brothers

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

The idea behind Medco Energi Internasional and Bakrie Brothers 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.