Correlation Between Bakrie Sumatera and Austindo Nusantara

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

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

Diversification Opportunities for Bakrie Sumatera and Austindo Nusantara

0.84

Correlation Coefficient

Bakrie Sumatera  Austindo Nusantara

Very poor diversification

The 3 months correlation between Bakrie and Austindo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations and Austindo Nusantara Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austindo Nusantara Jaya and Bakrie Sumatera 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 Bakrie Sumatera Plantations are associated (or correlated) with Austindo Nusantara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austindo Nusantara Jaya has no effect on the direction of Bakrie Sumatera i.e., Bakrie Sumatera and Austindo Nusantara go up and down completely randomly.

Pair Corralation between Bakrie Sumatera and Austindo Nusantara

Assuming the 90 days trading horizon Bakrie Sumatera Plantations is expected to generate 2.47 times more return on investment than Austindo Nusantara. However, Bakrie Sumatera is 2.47 times more volatile than Austindo Nusantara Jaya. It trades about 0.25 of its potential returns per unit of risk. Austindo Nusantara Jaya is currently generating about 0.1 per unit of risk. If you would invest  8,300  in Bakrie Sumatera Plantations on September 13, 2024 and sell it today you would earn a total of  3,900  from holding Bakrie Sumatera Plantations or generate 46.99% return on investment over 90 days.

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

Bakrie Sumatera Plantations  vs.  Austindo Nusantara Jaya

Bakrie Sumatera Plan

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bakrie Sumatera Plantations are ranked lower than 19 (%) 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.

Austindo Nusantara Jaya

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bakrie Sumatera and Austindo Nusantara

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

The idea behind Bakrie Sumatera Plantations and Austindo Nusantara Jaya 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.