Correlation Between PT Bumi and Federal Natl

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

Diversification Opportunities for PT Bumi and Federal Natl

0.18

Correlation Coefficient

PT Bumi  Federal Natl

Average diversification

The 3 months correlation between PBMRF and Federal is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and Federal Natl Pfd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Natl Pfd 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 Natl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Natl Pfd has no effect on the direction of PT Bumi i.e., PT Bumi and Federal Natl go up and down completely randomly.

Pair Corralation between PT Bumi and Federal Natl

Assuming the 90 days horizon PT Bumi Resources is expected to generate 48.51 times more return on investment than Federal Natl. However, PT Bumi is 48.51 times more volatile than Federal Natl Pfd. It trades about 0.14 of its potential returns per unit of risk. Federal Natl Pfd is currently generating about 0.01 per unit of risk. If you would invest  0.21  in PT Bumi Resources on December 23, 2024 and sell it today you would earn a total of  0.27  from holding PT Bumi Resources or generate 128.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

PT Bumi Resources  vs.  Federal Natl Pfd

PT Bumi Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 10 (%) 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 Natl Pfd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Natl Pfd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Federal Natl is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PT Bumi and Federal Natl

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

The idea behind PT Bumi Resources and Federal Natl Pfd 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.