Correlation Between Adaro Minerals and Eratex Djaja
Can any of the company-specific risk be diversified away by investing in both Adaro Minerals and Eratex Djaja 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 Adaro Minerals and Eratex Djaja into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaro Minerals Indonesia and Eratex Djaja Tbk, you can compare the effects of market volatilities on Adaro Minerals and Eratex Djaja 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 Adaro Minerals with a short position of Eratex Djaja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Minerals and Eratex Djaja.
Diversification Opportunities for Adaro Minerals and Eratex Djaja
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Adaro and Eratex is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Minerals Indonesia and Eratex Djaja Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eratex Djaja Tbk and Adaro Minerals 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 Adaro Minerals Indonesia are associated (or correlated) with Eratex Djaja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eratex Djaja Tbk has no effect on the direction of Adaro Minerals i.e., Adaro Minerals and Eratex Djaja go up and down completely randomly.
Pair Corralation between Adaro Minerals and Eratex Djaja
Assuming the 90 days trading horizon Adaro Minerals Indonesia is expected to under-perform the Eratex Djaja. But the stock apears to be less risky and, when comparing its historical volatility, Adaro Minerals Indonesia is 4.0 times less risky than Eratex Djaja. The stock trades about -0.28 of its potential returns per unit of risk. The Eratex Djaja Tbk is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,900 in Eratex Djaja Tbk on September 1, 2024 and sell it today you would earn a total of 1,300 from holding Eratex Djaja Tbk or generate 14.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Adaro Minerals Indonesia vs. Eratex Djaja Tbk
Performance |
| Timeline |
| Adaro Minerals Indonesia |
| Eratex Djaja Tbk |
Adaro Minerals and Eratex Djaja Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaro Minerals and Eratex Djaja
The main advantage of trading using opposite Adaro Minerals and Eratex Djaja positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Minerals position performs unexpectedly, Eratex Djaja 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 Eratex Djaja will offset losses from the drop in Eratex Djaja's long position.| Adaro Minerals vs. Bank Artos Indonesia | Adaro Minerals vs. GoTo Gojek Tokopedia | Adaro Minerals vs. Elang Mahkota Teknologi | Adaro Minerals vs. PT Bukalapak |
| Eratex Djaja vs. Ever Shine Textile | Eratex Djaja vs. PT Century Textile | Eratex Djaja vs. Argo Pantes Tbk | Eratex Djaja vs. Primarindo Asia Infrastructure |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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