Correlation Between Pratama Abadi and Adaro Energy
Can any of the company-specific risk be diversified away by investing in both Pratama Abadi 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 Pratama Abadi and Adaro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pratama Abadi Nusa and Adaro Energy Tbk, you can compare the effects of market volatilities on Pratama Abadi 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 Pratama Abadi with a short position of Adaro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pratama Abadi and Adaro Energy.
Diversification Opportunities for Pratama Abadi and Adaro Energy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pratama and Adaro is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pratama Abadi Nusa 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 Pratama Abadi 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 Pratama Abadi Nusa 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 Pratama Abadi i.e., Pratama Abadi and Adaro Energy go up and down completely randomly.
Pair Corralation between Pratama Abadi and Adaro Energy
Assuming the 90 days trading horizon Pratama Abadi Nusa is expected to under-perform the Adaro Energy. In addition to that, Pratama Abadi is 1.58 times more volatile than Adaro Energy Tbk. It trades about -0.04 of its total potential returns per unit of risk. Adaro Energy Tbk is currently generating about 0.05 per unit of volatility. If you would invest 368,000 in Adaro Energy Tbk on August 27, 2024 and sell it today you would earn a total of 7,000 from holding Adaro Energy Tbk or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pratama Abadi Nusa vs. Adaro Energy Tbk
Performance |
| Timeline |
| Pratama Abadi Nusa |
| Adaro Energy Tbk |
Pratama Abadi and Adaro Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pratama Abadi and Adaro Energy
The main advantage of trading using opposite Pratama Abadi and Adaro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pratama Abadi 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.| Pratama Abadi vs. Buyung Poetra Sembada | Pratama Abadi vs. Garudafood Putra Putri | Pratama Abadi vs. Campina Ice Cream | Pratama Abadi vs. Wijaya Karya Bangunan |
| Adaro Energy vs. Petrosea Tbk | Adaro Energy vs. Harum Energy Tbk | Adaro Energy vs. Perdana Karya Perkasa | Adaro Energy vs. Samindo Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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