Correlation Between Titan Company and PT Bumi

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

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

Diversification Opportunities for Titan Company and PT Bumi

0.69

Correlation Coefficient

Titan Company  PT Bumi

Poor diversification

The 3 months correlation between Titan and PJM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited 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 Titan Company 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 Titan Company Limited 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 Titan Company i.e., Titan Company and PT Bumi go up and down completely randomly.

Pair Corralation between Titan Company and PT Bumi

Assuming the 90 days trading horizon Titan Company Limited is expected to generate 0.17 times more return on investment than PT Bumi. However, Titan Company Limited is 5.85 times less risky than PT Bumi. It trades about -0.08 of its potential returns per unit of risk. PT Bumi Resources is currently generating about -0.03 per unit of risk. If you would invest  332,305  in Titan Company Limited on December 26, 2024 and sell it today you would lose (26,935) from holding Titan Company Limited or give up 8.11% of portfolio value over 90 days.

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

Titan Company Limited  vs.  PT Bumi Resources

Titan Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

PT Bumi Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bumi Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Titan Company and PT Bumi

The main advantage of trading using opposite Titan Company and PT Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company 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 Titan Company Limited 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.