Correlation Between China Coal and Bukit Asam

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

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

Diversification Opportunities for China Coal and Bukit Asam

0.07

Correlation Coefficient

China Coal  Bukit Asam

Significant diversification

The 3 months correlation between China and Bukit is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Coal Energy 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 China Coal 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 China Coal Energy 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 China Coal i.e., China Coal and Bukit Asam go up and down completely randomly.

Pair Corralation between China Coal and Bukit Asam

Assuming the 90 days horizon China Coal Energy is expected to under-perform the Bukit Asam. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Coal Energy is 1.48 times less risky than Bukit Asam. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Bukit Asam Tbk is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Bukit Asam Tbk on February 6, 2024 and sell it today you would lose (15.00) from holding Bukit Asam Tbk or give up 3.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

China Coal Energy  vs.  Bukit Asam Tbk

China Coal Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Coal Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, China Coal may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Bukit Asam Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bukit Asam Tbk are ranked lower than 7 (%) 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.

Pair Trading with China Coal and Bukit Asam

The main advantage of trading using opposite China Coal and Bukit Asam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Coal 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 China Coal Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.