Correlation Between Bukit Asam and Alliance Resource

Can any of the company-specific risk be diversified away by investing in both Bukit Asam and Alliance Resource 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 Alliance Resource 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 Alliance Resource Partners, you can compare the effects of market volatilities on Bukit Asam and Alliance Resource 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 Alliance Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bukit Asam and Alliance Resource.

Diversification Opportunities for Bukit Asam and Alliance Resource

-0.29

Correlation Coefficient

Bukit Asam  Alliance Resource

Very good diversification

The 3 months correlation between Bukit and Alliance is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bukit Asam Tbk and Alliance Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Resource 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 Alliance Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Resource has no effect on the direction of Bukit Asam i.e., Bukit Asam and Alliance Resource go up and down completely randomly.

Pair Corralation between Bukit Asam and Alliance Resource

Assuming the 90 days horizon Bukit Asam Tbk is expected to generate 5.28 times more return on investment than Alliance Resource. However, Bukit Asam is 5.28 times more volatile than Alliance Resource Partners. It trades about 0.06 of its potential returns per unit of risk. Alliance Resource Partners is currently generating about 0.07 per unit of risk. If you would invest  387.00  in Bukit Asam Tbk on March 7, 2024 and sell it today you would earn a total of  13.00  from holding Bukit Asam Tbk or generate 3.36% return on investment over 90 days.

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

Bukit Asam Tbk  vs.  Alliance Resource Partners

Bukit Asam Tbk

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bukit Asam Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Bukit Asam showed solid returns over the last few months and may actually be approaching a breakup point.

Alliance Resource

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Resource Partners are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Alliance Resource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bukit Asam and Alliance Resource

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

The idea behind Bukit Asam Tbk and Alliance Resource Partners 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.