Correlation Between Richardson Electronics and PT Bumi

Can any of the company-specific risk be diversified away by investing in both Richardson Electronics and PT Bumi 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 Richardson Electronics and PT Bumi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Richardson Electronics and PT Bumi Resources, you can compare the effects of market volatilities on Richardson Electronics and PT Bumi 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 Richardson Electronics with a short position of PT Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richardson Electronics and PT Bumi.

Diversification Opportunities for Richardson Electronics and PT Bumi

0.82

Correlation Coefficient

Richardson Electronics  PT Bumi

Very poor diversification

The 3 months correlation between Richardson and PJM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and PT Bumi Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bumi Resources and Richardson Electronics 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 Richardson Electronics are associated (or correlated) with PT Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bumi Resources has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and PT Bumi go up and down completely randomly.

Pair Corralation between Richardson Electronics and PT Bumi

Assuming the 90 days horizon Richardson Electronics is expected to generate 2.28 times less return on investment than PT Bumi. But when comparing it to its historical volatility, Richardson Electronics is 4.37 times less risky than PT Bumi. It trades about 0.15 of its potential returns per unit of risk. PT Bumi Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.75  in PT Bumi Resources on September 4, 2024 and sell it today you would earn a total of  0.05  from holding PT Bumi Resources or generate 6.67% return on investment over 90 days.

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

Richardson Electronics  vs.  PT Bumi Resources

Richardson Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Richardson Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

PT Bumi Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Bumi Resources are ranked lower than 11 (%) 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.

Pair Trading with Richardson Electronics and PT Bumi

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

The idea behind Richardson Electronics and PT Bumi Resources 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.