Correlation Between PT Bumi and National Health

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

Diversification Opportunities for PT Bumi and National Health

-0.65

Correlation Coefficient

PT Bumi  National Health

Excellent diversification

The 3 months correlation between PJM and National is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding PT Bumi Resources and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of PT Bumi i.e., PT Bumi and National Health go up and down completely randomly.

Pair Corralation between PT Bumi and National Health

Assuming the 90 days horizon PT Bumi Resources is expected to under-perform the National Health. In addition to that, PT Bumi is 5.41 times more volatile than National Health Investors. It trades about -0.02 of its total potential returns per unit of risk. National Health Investors is currently generating about 0.06 per unit of volatility. If you would invest  6,461  in National Health Investors on December 29, 2024 and sell it today you would earn a total of  339.00  from holding National Health Investors or generate 5.25% return on investment over 90 days.

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

PT Bumi Resources  vs.  National Health Investors

PT Bumi Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bumi Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

National Health Investors

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Health Investors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, National Health is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PT Bumi and National Health

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

The idea behind PT Bumi Resources and National Health Investors 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.