Correlation Between Tradegate and Bumitama Agri

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

By analyzing existing cross correlation between Tradegate AG Wertpapierhandelsbank and Bumitama Agri, you can compare the effects of market volatilities on Tradegate and Bumitama Agri 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 Tradegate with a short position of Bumitama Agri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tradegate and Bumitama Agri.

Diversification Opportunities for Tradegate and Bumitama Agri

0.06

Correlation Coefficient

Tradegate  Bumitama Agri

Significant diversification

The 3 months correlation between Tradegate and Bumitama is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tradegate AG Wertpapierhandels and Bumitama Agri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumitama Agri and Tradegate 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 Tradegate AG Wertpapierhandelsbank are associated (or correlated) with Bumitama Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumitama Agri has no effect on the direction of Tradegate i.e., Tradegate and Bumitama Agri go up and down completely randomly.

Pair Corralation between Tradegate and Bumitama Agri

Assuming the 90 days horizon Tradegate AG Wertpapierhandelsbank is expected to under-perform the Bumitama Agri. But the stock apears to be less risky and, when comparing its historical volatility, Tradegate AG Wertpapierhandelsbank is 4.66 times less risky than Bumitama Agri. The stock trades about -0.12 of its potential returns per unit of risk. The Bumitama Agri is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Bumitama Agri on September 15, 2024 and sell it today you would earn a total of  5.00  from holding Bumitama Agri or generate 8.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Tradegate AG Wertpapierhandels  vs.  Bumitama Agri

Tradegate AG Wertpap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tradegate AG Wertpapierhandelsbank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tradegate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bumitama Agri

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Tradegate and Bumitama Agri

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

The idea behind Tradegate AG Wertpapierhandelsbank and Bumitama Agri 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.