Correlation Between Bakrie Sumatera and Timah Persero

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

Diversification Opportunities for Bakrie Sumatera and Timah Persero

0.59

Correlation Coefficient

Bakrie Sumatera  Timah Persero

Very weak diversification

The 3 months correlation between Bakrie and Timah is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bakrie Sumatera Plantations and Timah Persero Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timah Persero Tbk 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 Timah Persero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timah Persero Tbk has no effect on the direction of Bakrie Sumatera i.e., Bakrie Sumatera and Timah Persero go up and down completely randomly.

Pair Corralation between Bakrie Sumatera and Timah Persero

Assuming the 90 days trading horizon Bakrie Sumatera Plantations is expected to under-perform the Timah Persero. But the stock apears to be less risky and, when comparing its historical volatility, Bakrie Sumatera Plantations is 1.42 times less risky than Timah Persero. The stock trades about -0.01 of its potential returns per unit of risk. The Timah Persero Tbk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  113,267  in Timah Persero Tbk on September 4, 2024 and sell it today you would lose (8,767) from holding Timah Persero Tbk or give up 7.74% of portfolio value over 90 days.

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

Bakrie Sumatera Plantations  vs.  Timah Persero Tbk

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.

Timah Persero Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Timah Persero Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Timah Persero may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bakrie Sumatera and Timah Persero

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

The idea behind Bakrie Sumatera Plantations and Timah Persero Tbk 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.