Correlation Between Adaro Energy and Bukit Asam
Can any of the company-specific risk be diversified away by investing in both Adaro Energy and Bukit Asam 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 Bukit Asam 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 Bukit Asam Tbk, you can compare the effects of market volatilities on Adaro Energy and Bukit Asam 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 Bukit Asam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Energy and Bukit Asam.
Diversification Opportunities for Adaro Energy and Bukit Asam
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adaro and Bukit is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and Bukit Asam Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bukit Asam Tbk 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 Bukit Asam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bukit Asam Tbk has no effect on the direction of Adaro Energy i.e., Adaro Energy and Bukit Asam go up and down completely randomly.
Pair Corralation between Adaro Energy and Bukit Asam
Assuming the 90 days trading horizon Adaro Energy Tbk is expected to generate 1.44 times more return on investment than Bukit Asam. However, Adaro Energy is 1.44 times more volatile than Bukit Asam Tbk. It trades about 0.03 of its potential returns per unit of risk. Bukit Asam Tbk is currently generating about -0.07 per unit of risk. If you would invest 363,000 in Adaro Energy Tbk on August 30, 2024 and sell it today you would earn a total of 4,000 from holding Adaro Energy Tbk or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adaro Energy Tbk vs. Bukit Asam Tbk
Performance |
| Timeline |
| Adaro Energy Tbk |
| Bukit Asam Tbk |
Adaro Energy and Bukit Asam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaro Energy and Bukit Asam
The main advantage of trading using opposite Adaro Energy and Bukit Asam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Energy position performs unexpectedly, Bukit Asam 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 Bukit Asam will offset losses from the drop in Bukit Asam'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 |
| Bukit Asam vs. Perusahaan Gas Negara | Bukit Asam vs. Indo Tambangraya Megah | Bukit Asam vs. Aneka Tambang Persero | Bukit Asam vs. Adaro Energy 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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