Correlation Between Perusahaan Gas and Bayan Resources

Can any of the company-specific risk be diversified away by investing in both Perusahaan Gas and Bayan Resources 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 Perusahaan Gas and Bayan Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perusahaan Gas Negara and Bayan Resources Tbk, you can compare the effects of market volatilities on Perusahaan Gas and Bayan Resources 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 Perusahaan Gas with a short position of Bayan Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perusahaan Gas and Bayan Resources.

Diversification Opportunities for Perusahaan Gas and Bayan Resources

0.68

Correlation Coefficient

Perusahaan Gas  Bayan Resources

Poor diversification

The 3 months correlation between Perusahaan and Bayan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Perusahaan Gas Negara and Bayan Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayan Resources Tbk and Perusahaan Gas 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 Perusahaan Gas Negara are associated (or correlated) with Bayan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayan Resources Tbk has no effect on the direction of Perusahaan Gas i.e., Perusahaan Gas and Bayan Resources go up and down completely randomly.

Pair Corralation between Perusahaan Gas and Bayan Resources

Assuming the 90 days trading horizon Perusahaan Gas is expected to generate 8.58 times less return on investment than Bayan Resources. In addition to that, Perusahaan Gas is 1.11 times more volatile than Bayan Resources Tbk. It trades about 0.01 of its total potential returns per unit of risk. Bayan Resources Tbk is currently generating about 0.08 per unit of volatility. If you would invest  1,741,370  in Bayan Resources Tbk on September 30, 2024 and sell it today you would earn a total of  276,130  from holding Bayan Resources Tbk or generate 15.86% return on investment over 90 days.

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

Perusahaan Gas Negara  vs.  Bayan Resources Tbk

Perusahaan Gas Negara

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perusahaan Gas Negara are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Perusahaan Gas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bayan Resources Tbk

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bayan Resources Tbk are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bayan Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perusahaan Gas and Bayan Resources

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

The idea behind Perusahaan Gas Negara and Bayan Resources Tbk 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.