Correlation Between PT Adaro and China Shenhua
Can any of the company-specific risk be diversified away by investing in both PT Adaro and China Shenhua 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 Adaro and China Shenhua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Adaro Energy and China Shenhua Energy, you can compare the effects of market volatilities on PT Adaro and China Shenhua 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 Adaro with a short position of China Shenhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Adaro and China Shenhua.
Diversification Opportunities for PT Adaro and China Shenhua
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between A64 and China is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding PT Adaro Energy and China Shenhua Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shenhua Energy and PT Adaro 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 Adaro Energy are associated (or correlated) with China Shenhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shenhua Energy has no effect on the direction of PT Adaro i.e., PT Adaro and China Shenhua go up and down completely randomly.
Pair Corralation between PT Adaro and China Shenhua
Assuming the 90 days horizon PT Adaro Energy is expected to under-perform the China Shenhua. In addition to that, PT Adaro is 3.7 times more volatile than China Shenhua Energy. It trades about -0.03 of its total potential returns per unit of risk. China Shenhua Energy is currently generating about 0.07 per unit of volatility. If you would invest 358.00 in China Shenhua Energy on January 7, 2025 and sell it today you would earn a total of 9.00 from holding China Shenhua Energy or generate 2.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Adaro Energy vs. China Shenhua Energy
Performance |
| Timeline |
| PT Adaro Energy |
| China Shenhua Energy |
PT Adaro and China Shenhua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Adaro and China Shenhua
The main advantage of trading using opposite PT Adaro and China Shenhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Adaro position performs unexpectedly, China Shenhua 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 China Shenhua will offset losses from the drop in China Shenhua's long position.| PT Adaro vs. China Shenhua Energy | PT Adaro vs. PT Bayan Resources | PT Adaro vs. Yanzhou Coal Mining | PT Adaro vs. Yanzhou Coal Mining |
| China Shenhua vs. PT Bayan Resources | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. Yanzhou Coal Mining | China Shenhua vs. PT Adaro Energy |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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