Correlation Between Adaro Energy and Indo Oil
Can any of the company-specific risk be diversified away by investing in both Adaro Energy and Indo Oil 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 Indo Oil 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 Indo Oil Perkasa, you can compare the effects of market volatilities on Adaro Energy and Indo Oil 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 Indo Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Energy and Indo Oil.
Diversification Opportunities for Adaro Energy and Indo Oil
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Adaro and Indo is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and Indo Oil Perkasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Oil Perkasa 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 Indo Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Oil Perkasa has no effect on the direction of Adaro Energy i.e., Adaro Energy and Indo Oil go up and down completely randomly.
Pair Corralation between Adaro Energy and Indo Oil
Assuming the 90 days trading horizon Adaro Energy Tbk is expected to generate 0.66 times more return on investment than Indo Oil. However, Adaro Energy Tbk is 1.52 times less risky than Indo Oil. It trades about 0.04 of its potential returns per unit of risk. Indo Oil Perkasa is currently generating about -0.03 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adaro Energy Tbk vs. Indo Oil Perkasa
Performance |
| Timeline |
| Adaro Energy Tbk |
| Indo Oil Perkasa |
Adaro Energy and Indo Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaro Energy and Indo Oil
The main advantage of trading using opposite Adaro Energy and Indo Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Energy position performs unexpectedly, Indo Oil 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 Indo Oil will offset losses from the drop in Indo Oil'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 |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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