Correlation Between Langgeng Makmur and Bumi Resources

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

By analyzing existing cross correlation between Langgeng Makmur Industri and Bumi Resources Minerals, you can compare the effects of market volatilities on Langgeng Makmur and Bumi Resources 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 Langgeng Makmur with a short position of Bumi Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Langgeng Makmur and Bumi Resources.

Diversification Opportunities for Langgeng Makmur and Bumi Resources

-0.15

Correlation Coefficient

Langgeng Makmur  Bumi Resources

Good diversification

The 3 months correlation between Langgeng and Bumi is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Langgeng Makmur Industri and Bumi Resources Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Resources Minerals and Langgeng Makmur 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 Langgeng Makmur Industri are associated (or correlated) with Bumi Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Resources Minerals has no effect on the direction of Langgeng Makmur i.e., Langgeng Makmur and Bumi Resources go up and down completely randomly.

Pair Corralation between Langgeng Makmur and Bumi Resources

Assuming the 90 days trading horizon Langgeng Makmur Industri is expected to generate 0.56 times more return on investment than Bumi Resources. However, Langgeng Makmur Industri is 1.78 times less risky than Bumi Resources. It trades about 0.06 of its potential returns per unit of risk. Bumi Resources Minerals is currently generating about -0.15 per unit of risk. If you would invest  9,100  in Langgeng Makmur Industri on March 22, 2024 and sell it today you would earn a total of  200.00  from holding Langgeng Makmur Industri or generate 2.2% return on investment over 90 days.

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

Langgeng Makmur Industri  vs.  Bumi Resources Minerals

Langgeng Makmur Industri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Langgeng Makmur Industri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bumi Resources Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bumi Resources Minerals 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 July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Langgeng Makmur and Bumi Resources

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

The idea behind Langgeng Makmur Industri and Bumi Resources Minerals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.