Correlation Between Bukit Asam and Semen Indonesia

Can any of the company-specific risk be diversified away by investing in both Bukit Asam and Semen Indonesia 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 Bukit Asam and Semen Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Bukit Asam and Semen Indonesia

-0.8

Correlation Coefficient

Bukit Asam  Semen Indonesia

Pay attention - limited upside

The 3 months correlation between Bukit and Semen is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bukit Asam Tbk and Semen Indonesia Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semen Indonesia Persero and Bukit Asam 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 Bukit Asam Tbk are associated (or correlated) with Semen Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semen Indonesia Persero has no effect on the direction of Bukit Asam i.e., Bukit Asam and Semen Indonesia go up and down completely randomly.

Pair Corralation between Bukit Asam and Semen Indonesia

Assuming the 90 days trading horizon Bukit Asam Tbk is expected to generate 1.26 times more return on investment than Semen Indonesia. However, Bukit Asam is 1.26 times more volatile than Semen Indonesia Persero. It trades about -0.09 of its potential returns per unit of risk. Semen Indonesia Persero is currently generating about -0.97 per unit of risk. If you would invest  297,000  in Bukit Asam Tbk on January 28, 2024 and sell it today you would lose (9,000) from holding Bukit Asam Tbk or give up 3.03% of portfolio value over 90 days.

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

Bukit Asam Tbk  vs.  Semen Indonesia Persero

Bukit Asam Tbk

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bukit Asam Tbk are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Bukit Asam disclosed solid returns over the last few months and may actually be approaching a breakup point.

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bukit Asam and Semen Indonesia

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

The idea behind Bukit Asam Tbk and Semen Indonesia Persero 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.