Correlation Between Bakrie Sumatera and Solusi Bangun

Can any of the company-specific risk be diversified away by investing in both Bakrie Sumatera and Solusi Bangun 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 Solusi Bangun 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 Solusi Bangun Indonesia, you can compare the effects of market volatilities on Bakrie Sumatera and Solusi Bangun 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 Solusi Bangun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakrie Sumatera and Solusi Bangun.

Diversification Opportunities for Bakrie Sumatera and Solusi Bangun

0.29

Correlation Coefficient

Bakrie Sumatera  Solusi Bangun

Modest diversification

The 3 months correlation between Bakrie and Solusi is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations and Solusi Bangun Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solusi Bangun Indonesia 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 Solusi Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solusi Bangun Indonesia has no effect on the direction of Bakrie Sumatera i.e., Bakrie Sumatera and Solusi Bangun go up and down completely randomly.

Pair Corralation between Bakrie Sumatera and Solusi Bangun

Assuming the 90 days trading horizon Bakrie Sumatera Plantations is expected to generate 0.95 times more return on investment than Solusi Bangun. However, Bakrie Sumatera Plantations is 1.06 times less risky than Solusi Bangun. It trades about 0.24 of its potential returns per unit of risk. Solusi Bangun Indonesia is currently generating about -0.04 per unit of risk. If you would invest  8,200  in Bakrie Sumatera Plantations on September 4, 2024 and sell it today you would earn a total of  3,600  from holding Bakrie Sumatera Plantations or generate 43.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Bakrie Sumatera Plantations  vs.  Solusi Bangun Indonesia

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.

Solusi Bangun Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solusi Bangun Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Solusi Bangun is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bakrie Sumatera and Solusi Bangun

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

The idea behind Bakrie Sumatera Plantations and Solusi Bangun Indonesia 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.