Correlation Between Bukit Asam and Indo Tambangraya

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

Diversification Opportunities for Bukit Asam and Indo Tambangraya

-0.16

Correlation Coefficient

Bukit Asam  Indo Tambangraya

Good diversification

The 3 months correlation between Bukit and Indo is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bukit Asam Tbk and Indo Tambangraya Megah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Tambangraya Megah 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 Indo Tambangraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Tambangraya Megah has no effect on the direction of Bukit Asam i.e., Bukit Asam and Indo Tambangraya go up and down completely randomly.

Pair Corralation between Bukit Asam and Indo Tambangraya

Assuming the 90 days horizon Bukit Asam Tbk is expected to under-perform the Indo Tambangraya. In addition to that, Bukit Asam is 1.19 times more volatile than Indo Tambangraya Megah. It trades about -0.06 of its total potential returns per unit of risk. Indo Tambangraya Megah is currently generating about -0.02 per unit of volatility. If you would invest  301.00  in Indo Tambangraya Megah on November 28, 2024 and sell it today you would lose (21.00) from holding Indo Tambangraya Megah or give up 6.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Bukit Asam Tbk  vs.  Indo Tambangraya Megah

Bukit Asam Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bukit Asam Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Indo Tambangraya is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bukit Asam and Indo Tambangraya

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

The idea behind Bukit Asam Tbk and Indo Tambangraya Megah 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.