Correlation Between Bukit Asam and Terregra Asia

Can any of the company-specific risk be diversified away by investing in both Bukit Asam and Terregra Asia 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 Bukit Asam and Terregra Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bukit Asam Tbk and Terregra Asia Energy, you can compare the effects of market volatilities on Bukit Asam and Terregra Asia 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 Bukit Asam with a short position of Terregra Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bukit Asam and Terregra Asia.

Diversification Opportunities for Bukit Asam and Terregra Asia

0.22

Correlation Coefficient

Bukit Asam  Terregra Asia

Modest diversification

The 3 months correlation between Bukit and Terregra is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bukit Asam Tbk and Terregra Asia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terregra Asia Energy and Bukit Asam 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 Bukit Asam Tbk are associated (or correlated) with Terregra Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terregra Asia Energy has no effect on the direction of Bukit Asam i.e., Bukit Asam and Terregra Asia go up and down completely randomly.

Pair Corralation between Bukit Asam and Terregra Asia

Assuming the 90 days trading horizon Bukit Asam Tbk is expected to generate 0.29 times more return on investment than Terregra Asia. However, Bukit Asam Tbk is 3.49 times less risky than Terregra Asia. It trades about 0.04 of its potential returns per unit of risk. Terregra Asia Energy is currently generating about -0.13 per unit of risk. If you would invest  275,000  in Bukit Asam Tbk on September 16, 2024 and sell it today you would earn a total of  3,000  from holding Bukit Asam Tbk or generate 1.09% return on investment over 90 days.

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

Bukit Asam Tbk  vs.  Terregra Asia Energy

Bukit Asam Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bukit Asam Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bukit Asam is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Terregra Asia Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terregra Asia Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bukit Asam and Terregra Asia

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

The idea behind Bukit Asam Tbk and Terregra Asia Energy 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.