Correlation Between Weha Transportasi and Bayan Resources

Can any of the company-specific risk be diversified away by investing in both Weha Transportasi and Bayan Resources 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 Weha Transportasi and Bayan Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weha Transportasi Indonesia and Bayan Resources Tbk, you can compare the effects of market volatilities on Weha Transportasi and Bayan Resources 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 Weha Transportasi with a short position of Bayan Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weha Transportasi and Bayan Resources.

Diversification Opportunities for Weha Transportasi and Bayan Resources

0.65

Correlation Coefficient

Weha Transportasi  Bayan Resources

Poor diversification

The 3 months correlation between Weha and Bayan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Weha Transportasi Indonesia and Bayan Resources Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayan Resources Tbk and Weha Transportasi 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 Weha Transportasi Indonesia are associated (or correlated) with Bayan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayan Resources Tbk has no effect on the direction of Weha Transportasi i.e., Weha Transportasi and Bayan Resources go up and down completely randomly.

Pair Corralation between Weha Transportasi and Bayan Resources

Assuming the 90 days trading horizon Weha Transportasi Indonesia is expected to under-perform the Bayan Resources. In addition to that, Weha Transportasi is 2.97 times more volatile than Bayan Resources Tbk. It trades about -0.06 of its total potential returns per unit of risk. Bayan Resources Tbk is currently generating about -0.02 per unit of volatility. If you would invest  2,025,000  in Bayan Resources Tbk on December 30, 2024 and sell it today you would lose (22,500) from holding Bayan Resources Tbk or give up 1.11% of portfolio value over 90 days.

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

Weha Transportasi Indonesia  vs.  Bayan Resources Tbk

Weha Transportasi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Weha Transportasi Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bayan Resources Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bayan Resources Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bayan Resources 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 Weha Transportasi and Bayan Resources

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

The idea behind Weha Transportasi Indonesia and Bayan Resources 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.