Correlation Between TerraCom and Adaro Energy
Can any of the company-specific risk be diversified away by investing in both TerraCom 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 TerraCom and Adaro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TerraCom Limited and Adaro Energy Tbk, you can compare the effects of market volatilities on TerraCom 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 TerraCom with a short position of Adaro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TerraCom and Adaro Energy.
Diversification Opportunities for TerraCom and Adaro Energy
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TerraCom and Adaro is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding TerraCom Limited 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 TerraCom 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 TerraCom Limited 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 TerraCom i.e., TerraCom and Adaro Energy go up and down completely randomly.
Pair Corralation between TerraCom and Adaro Energy
Assuming the 90 days horizon TerraCom Limited is expected to under-perform the Adaro Energy. In addition to that, TerraCom is 1.36 times more volatile than Adaro Energy Tbk. It trades about -0.69 of its total potential returns per unit of risk. Adaro Energy Tbk is currently generating about -0.31 per unit of volatility. If you would invest 996.00 in Adaro Energy Tbk on November 9, 2024 and sell it today you would lose (274.00) from holding Adaro Energy Tbk or give up 27.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 25.0% |
| Values | Daily Returns |
TerraCom Limited vs. Adaro Energy Tbk
Performance |
| Timeline |
| TerraCom Limited |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| Adaro Energy Tbk |
TerraCom and Adaro Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TerraCom and Adaro Energy
The main advantage of trading using opposite TerraCom and Adaro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TerraCom 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.| TerraCom vs. Indo Tambangraya Megah | TerraCom vs. Adaro Energy Tbk | TerraCom vs. Thungela Resources Limited | TerraCom vs. China Coal Energy |
| Adaro Energy vs. Thungela Resources Limited | Adaro Energy vs. Geo Energy Resources | Adaro Energy vs. Bukit Asam Tbk | Adaro Energy vs. China Shenhua Energy |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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