Correlation Between PT Bumi and Evolution

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

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

Diversification Opportunities for PT Bumi and Evolution

-0.39

Correlation Coefficient

PT Bumi  Evolution

Very good diversification

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

Pair Corralation between PT Bumi and Evolution

Assuming the 90 days horizon PT Bumi Resources is expected to generate 3.73 times more return on investment than Evolution. However, PT Bumi is 3.73 times more volatile than Evolution AB. It trades about 0.07 of its potential returns per unit of risk. Evolution AB is currently generating about 0.04 per unit of risk. If you would invest  0.50  in PT Bumi Resources on April 21, 2025 and sell it today you would earn a total of  0.05  from holding PT Bumi Resources or generate 10.0% return on investment over 90 days.

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

PT Bumi Resources  vs.  Evolution AB

PT Bumi Resources

Risk-Adjusted Performance

Modest

Over the last 90 days PT Bumi Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, PT Bumi reported solid returns over the last few months and may actually be approaching a breakup point.

Evolution AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Evolution may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with PT Bumi and Evolution

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

The idea behind PT Bumi Resources and Evolution AB 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.