Correlation Between Natural Resource and Bukit Asam

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

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

Diversification Opportunities for Natural Resource and Bukit Asam

-0.33

Correlation Coefficient

Natural Resource  Bukit Asam

Very good diversification

The 3 months correlation between Natural and Bukit is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Natural Resource Partners and Bukit Asam Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bukit Asam Tbk and Natural Resource 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 Natural Resource Partners are associated (or correlated) with Bukit Asam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bukit Asam Tbk has no effect on the direction of Natural Resource i.e., Natural Resource and Bukit Asam go up and down completely randomly.

Pair Corralation between Natural Resource and Bukit Asam

Considering the 90-day investment horizon Natural Resource Partners is expected to generate 0.25 times more return on investment than Bukit Asam. However, Natural Resource Partners is 4.06 times less risky than Bukit Asam. It trades about 0.15 of its potential returns per unit of risk. Bukit Asam Tbk is currently generating about -0.13 per unit of risk. If you would invest  10,475  in Natural Resource Partners on September 17, 2024 and sell it today you would earn a total of  300.00  from holding Natural Resource Partners or generate 2.86% return on investment over 90 days.

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

Natural Resource Partners  vs.  Bukit Asam Tbk

Natural Resource Partners

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Resource Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Natural Resource reported solid returns over the last few months and may actually be approaching a breakup point.

Bukit Asam Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bukit Asam Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Bukit Asam is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Natural Resource and Bukit Asam

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

The idea behind Natural Resource Partners and Bukit Asam 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.