Correlation Between Timah Persero and Bakrie Sumatera

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

By analyzing existing cross correlation between Timah Persero Tbk and Bakrie Sumatera Plantations, you can compare the effects of market volatilities on Timah Persero and Bakrie Sumatera 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 Timah Persero with a short position of Bakrie Sumatera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timah Persero and Bakrie Sumatera.

Diversification Opportunities for Timah Persero and Bakrie Sumatera

0.47

Correlation Coefficient

Timah Persero  Bakrie Sumatera

Very weak diversification

The 3 months correlation between Timah and Bakrie is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Timah Persero Tbk and Bakrie Sumatera Plantations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrie Sumatera Plan and Timah Persero 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 Timah Persero Tbk are associated (or correlated) with Bakrie Sumatera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrie Sumatera Plan has no effect on the direction of Timah Persero i.e., Timah Persero and Bakrie Sumatera go up and down completely randomly.

Pair Corralation between Timah Persero and Bakrie Sumatera

Assuming the 90 days trading horizon Timah Persero is expected to generate 1.79 times less return on investment than Bakrie Sumatera. In addition to that, Timah Persero is 1.41 times more volatile than Bakrie Sumatera Plantations. It trades about 0.09 of its total potential returns per unit of risk. Bakrie Sumatera Plantations is currently generating about 0.24 per unit of volatility. If you would invest  8,300  in Bakrie Sumatera Plantations on September 12, 2024 and sell it today you would earn a total of  3,700  from holding Bakrie Sumatera Plantations or generate 44.58% return on investment over 90 days.

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

Timah Persero Tbk  vs.  Bakrie Sumatera Plantations

Timah Persero Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Timah Persero Tbk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Timah Persero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bakrie Sumatera Plan

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bakrie Sumatera Plantations are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bakrie Sumatera disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timah Persero and Bakrie Sumatera

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

The idea behind Timah Persero Tbk and Bakrie Sumatera Plantations 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.