Correlation Between Adaro Energy and Medco Energi
Can any of the company-specific risk be diversified away by investing in both Adaro Energy and Medco Energi 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 Medco Energi 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 Medco Energi Internasional, you can compare the effects of market volatilities on Adaro Energy and Medco Energi 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 Medco Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Energy and Medco Energi.
Diversification Opportunities for Adaro Energy and Medco Energi
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Adaro and Medco is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and Medco Energi Internasional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medco Energi Interna 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 Medco Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medco Energi Interna has no effect on the direction of Adaro Energy i.e., Adaro Energy and Medco Energi go up and down completely randomly.
Pair Corralation between Adaro Energy and Medco Energi
Assuming the 90 days trading horizon Adaro Energy Tbk is expected to generate 0.68 times more return on investment than Medco Energi. However, Adaro Energy Tbk is 1.48 times less risky than Medco Energi. It trades about 0.04 of its potential returns per unit of risk. Medco Energi Internasional is currently generating about 0.02 per unit of risk. If you would invest 265,383 in Adaro Energy Tbk on August 30, 2024 and sell it today you would earn a total of 101,617 from holding Adaro Energy Tbk or generate 38.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Adaro Energy Tbk vs. Medco Energi Internasional
Performance |
| Timeline |
| Adaro Energy Tbk |
| Medco Energi Interna |
Adaro Energy and Medco Energi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaro Energy and Medco Energi
The main advantage of trading using opposite Adaro Energy and Medco Energi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Energy position performs unexpectedly, Medco Energi 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 Medco Energi will offset losses from the drop in Medco Energi's long position.| Adaro Energy vs. Bukit Asam Tbk | Adaro Energy vs. Aneka Tambang Persero | Adaro Energy vs. Perusahaan Gas Negara | Adaro Energy vs. Indo Tambangraya Megah |
| Medco Energi vs. Vale Indonesia Tbk | Medco Energi vs. Timah Persero Tbk | Medco Energi vs. Perusahaan Gas Negara | Medco Energi vs. Bukit Asam Tbk |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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