Correlation Between PT Bumi and Vivendi SE

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

Diversification Opportunities for PT Bumi and Vivendi SE

-0.48

Correlation Coefficient

PT Bumi  Vivendi SE

Very good diversification

The 3 months correlation between PJM and Vivendi is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and Vivendi SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vivendi SE 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 Vivendi SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vivendi SE has no effect on the direction of PT Bumi i.e., PT Bumi and Vivendi SE go up and down completely randomly.

Pair Corralation between PT Bumi and Vivendi SE

Assuming the 90 days horizon PT Bumi Resources is expected to generate 5.09 times more return on investment than Vivendi SE. However, PT Bumi is 5.09 times more volatile than Vivendi SE. It trades about 0.03 of its potential returns per unit of risk. Vivendi SE is currently generating about 0.01 per unit of risk. If you would invest  0.95  in PT Bumi Resources on September 2, 2024 and sell it today you would lose (0.15) from holding PT Bumi Resources or give up 15.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PT Bumi Resources  vs.  Vivendi SE

PT Bumi Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PT Bumi reported solid returns over the last few months and may actually be approaching a breakup point.

Vivendi SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vivendi SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Bumi and Vivendi SE

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

The idea behind PT Bumi Resources and Vivendi SE 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.