Correlation Between PT Bumi and Coca Cola

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

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

Diversification Opportunities for PT Bumi and Coca Cola

-0.52

Correlation Coefficient

PT Bumi  Coca Cola

Excellent diversification

The 3 months correlation between PBMRF and Coca is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA and PT Bumi 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 PT Bumi Resources are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola FEMSA has no effect on the direction of PT Bumi i.e., PT Bumi and Coca Cola go up and down completely randomly.

Pair Corralation between PT Bumi and Coca Cola

Assuming the 90 days horizon PT Bumi Resources is expected to under-perform the Coca Cola. In addition to that, PT Bumi is 3.67 times more volatile than Coca Cola FEMSA SAB. It trades about -0.21 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.01 per unit of volatility. If you would invest  810.00  in Coca Cola FEMSA SAB on September 22, 2024 and sell it today you would lose (4.00) from holding Coca Cola FEMSA SAB or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

PT Bumi Resources  vs.  Coca Cola FEMSA SAB

PT Bumi Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Bumi reported solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola FEMSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola FEMSA SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bumi and Coca Cola

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

The idea behind PT Bumi Resources and Coca Cola FEMSA SAB 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.