Correlation Between Adaro Energy and NACCO Industries
Can any of the company-specific risk be diversified away by investing in both Adaro Energy and NACCO Industries 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 Energy and NACCO Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaro Energy Tbk and NACCO Industries, you can compare the effects of market volatilities on Adaro Energy and NACCO Industries 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 Energy with a short position of NACCO Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Energy and NACCO Industries.
Diversification Opportunities for Adaro Energy and NACCO Industries
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Adaro and NACCO is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and NACCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NACCO Industries and Adaro Energy 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 Energy Tbk are associated (or correlated) with NACCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NACCO Industries has no effect on the direction of Adaro Energy i.e., Adaro Energy and NACCO Industries go up and down completely randomly.
Pair Corralation between Adaro Energy and NACCO Industries
Assuming the 90 days horizon Adaro Energy Tbk is expected to generate 2.76 times more return on investment than NACCO Industries. However, Adaro Energy is 2.76 times more volatile than NACCO Industries. It trades about 0.08 of its potential returns per unit of risk. NACCO Industries is currently generating about -0.01 per unit of risk. If you would invest 333.00 in Adaro Energy Tbk on November 9, 2024 and sell it today you would earn a total of 389.00 from holding Adaro Energy Tbk or generate 116.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 89.14% |
| Values | Daily Returns |
Adaro Energy Tbk vs. NACCO Industries
Performance |
| Timeline |
| Adaro Energy Tbk |
| NACCO Industries |
Adaro Energy and NACCO Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaro Energy and NACCO Industries
The main advantage of trading using opposite Adaro Energy and NACCO Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Energy position performs unexpectedly, NACCO Industries 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 NACCO Industries will offset losses from the drop in NACCO Industries' long position.| Adaro Energy vs. Thungela Resources Limited | Adaro Energy vs. Geo Energy Resources | Adaro Energy vs. Bukit Asam Tbk | Adaro Energy vs. China Shenhua Energy |
| NACCO Industries vs. Alliance Resource Partners | NACCO Industries vs. Hallador Energy | NACCO Industries vs. Indo Tambangraya Megah | NACCO Industries vs. Natural Resource Partners |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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