Correlation Between Performance Food and PT Bumi

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

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

Diversification Opportunities for Performance Food and PT Bumi

0.01

Correlation Coefficient

Performance Food  PT Bumi

Significant diversification

The 3 months correlation between Performance and PJM is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group 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 Performance Food 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 Performance Food Group 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 Performance Food i.e., Performance Food and PT Bumi go up and down completely randomly.

Pair Corralation between Performance Food and PT Bumi

Assuming the 90 days trading horizon Performance Food is expected to generate 1.79 times less return on investment than PT Bumi. But when comparing it to its historical volatility, Performance Food Group is 4.36 times less risky than PT Bumi. It trades about 0.06 of its potential returns per unit of risk. PT Bumi Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.85  in PT Bumi Resources on October 25, 2024 and sell it today you would lose (0.20) from holding PT Bumi Resources or give up 23.53% of portfolio value over 90 days.

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

Performance Food Group  vs.  PT Bumi Resources

Performance Food

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Performance Food may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PT Bumi Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bumi Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Performance Food and PT Bumi

The main advantage of trading using opposite Performance Food and PT Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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 Performance Food Group 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.