Correlation Between Medco Energi and Adaro Energy
Can any of the company-specific risk be diversified away by investing in both Medco Energi and Adaro Energy 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 Medco Energi and Adaro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medco Energi Internasional and Adaro Energy Tbk, you can compare the effects of market volatilities on Medco Energi and Adaro Energy 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 Medco Energi with a short position of Adaro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medco Energi and Adaro Energy.
Diversification Opportunities for Medco Energi and Adaro Energy
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Medco and Adaro is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Medco Energi Internasional and Adaro Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaro Energy Tbk and Medco Energi 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 Medco Energi Internasional are associated (or correlated) with Adaro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaro Energy Tbk has no effect on the direction of Medco Energi i.e., Medco Energi and Adaro Energy go up and down completely randomly.
Pair Corralation between Medco Energi and Adaro Energy
Assuming the 90 days trading horizon Medco Energi Internasional is expected to generate 0.58 times more return on investment than Adaro Energy. However, Medco Energi Internasional is 1.74 times less risky than Adaro Energy. It trades about -0.06 of its potential returns per unit of risk. Adaro Energy Tbk is currently generating about -0.05 per unit of risk. If you would invest 132,422 in Medco Energi Internasional on September 1, 2024 and sell it today you would lose (23,422) from holding Medco Energi Internasional or give up 17.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Medco Energi Internasional vs. Adaro Energy Tbk
Performance |
| Timeline |
| Medco Energi Interna |
| Adaro Energy Tbk |
Medco Energi and Adaro Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medco Energi and Adaro Energy
The main advantage of trading using opposite Medco Energi and Adaro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medco Energi position performs unexpectedly, Adaro Energy 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 Adaro Energy will offset losses from the drop in Adaro Energy's long position.| Medco Energi vs. Vale Indonesia Tbk | Medco Energi vs. Timah Persero Tbk | Medco Energi vs. Perusahaan Gas Negara | Medco Energi vs. Bukit Asam Tbk |
| Adaro Energy vs. Bukit Asam Tbk | Adaro Energy vs. Aneka Tambang Persero | Adaro Energy vs. Perusahaan Gas Negara | Adaro Energy vs. Indo Tambangraya Megah |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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