Correlation Between PT Bumi and Federal Home

Can any of the company-specific risk be diversified away by investing in both PT Bumi and Federal Home 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 Federal Home 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 Federal Home Loan, you can compare the effects of market volatilities on PT Bumi and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Bumi and Federal Home.

Diversification Opportunities for PT Bumi and Federal Home

0.02

Correlation Coefficient

PT Bumi  Federal Home

Significant diversification

The 3 months correlation between PBMRF and Federal is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of PT Bumi i.e., PT Bumi and Federal Home go up and down completely randomly.

Pair Corralation between PT Bumi and Federal Home

Assuming the 90 days horizon PT Bumi Resources is expected to generate 13.21 times more return on investment than Federal Home. However, PT Bumi is 13.21 times more volatile than Federal Home Loan. It trades about 0.03 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.12 per unit of risk. If you would invest  0.60  in PT Bumi Resources on December 4, 2024 and sell it today you would lose (0.58) from holding PT Bumi Resources or give up 96.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

PT Bumi Resources  vs.  Federal Home Loan

PT Bumi Resources

Risk-Adjusted Performance

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.

Federal Home Loan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bumi and Federal Home

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

The idea behind PT Bumi Resources and Federal Home Loan 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.