Correlation Between Bayan Resources and Indo Kordsa

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

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

Diversification Opportunities for Bayan Resources and Indo Kordsa

0.39

Correlation Coefficient

Bayan Resources  Indo Kordsa

Weak diversification

The 3 months correlation between Bayan and Indo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bayan Resources Tbk and Indo Kordsa Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Kordsa Tbk and Bayan Resources 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 Bayan Resources Tbk are associated (or correlated) with Indo Kordsa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Kordsa Tbk has no effect on the direction of Bayan Resources i.e., Bayan Resources and Indo Kordsa go up and down completely randomly.

Pair Corralation between Bayan Resources and Indo Kordsa

Assuming the 90 days trading horizon Bayan Resources Tbk is expected to under-perform the Indo Kordsa. But the stock apears to be less risky and, when comparing its historical volatility, Bayan Resources Tbk is 7.02 times less risky than Indo Kordsa. The stock trades about -0.24 of its potential returns per unit of risk. The Indo Kordsa Tbk is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  567,500  in Indo Kordsa Tbk on February 24, 2024 and sell it today you would earn a total of  30,000  from holding Indo Kordsa Tbk or generate 5.29% return on investment over 90 days.

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

Bayan Resources Tbk  vs.  Indo Kordsa Tbk

Bayan Resources Tbk

Risk-Adjusted Performance

0 of 100

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 basic indicators, Bayan Resources is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Indo Kordsa Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Kordsa Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Indo Kordsa 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 Bayan Resources and Indo Kordsa

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

The idea behind Bayan Resources Tbk and Indo Kordsa 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.