Correlation Between PT Bumi and Federal National

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

Diversification Opportunities for PT Bumi and Federal National

0.7

Correlation Coefficient

PT Bumi  Federal National

Poor diversification

The 3 months correlation between PBMRF and Federal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of PT Bumi i.e., PT Bumi and Federal National go up and down completely randomly.

Pair Corralation between PT Bumi and Federal National

If you would invest  1,470  in Federal National Mortgage on September 14, 2024 and sell it today you would earn a total of  260.00  from holding Federal National Mortgage or generate 17.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

PT Bumi Resources  vs.  Federal National Mortgage

PT Bumi Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 12 (%) 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 National Mortgage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Federal National disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bumi and Federal National

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

The idea behind PT Bumi Resources and Federal National Mortgage 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.