Correlation Between Whitehaven Coal and Adaro Energy
Can any of the company-specific risk be diversified away by investing in both Whitehaven Coal 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 Whitehaven Coal and Adaro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whitehaven Coal Limited and Adaro Energy Tbk, you can compare the effects of market volatilities on Whitehaven Coal 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 Whitehaven Coal with a short position of Adaro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitehaven Coal and Adaro Energy.
Diversification Opportunities for Whitehaven Coal and Adaro Energy
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Whitehaven and Adaro is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Whitehaven Coal 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 Whitehaven Coal 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 Whitehaven Coal 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 Whitehaven Coal i.e., Whitehaven Coal and Adaro Energy go up and down completely randomly.
Pair Corralation between Whitehaven Coal and Adaro Energy
Assuming the 90 days horizon Whitehaven Coal Limited is expected to under-perform the Adaro Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Whitehaven Coal Limited is 1.61 times less risky than Adaro Energy. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Adaro Energy Tbk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 837.00 in Adaro Energy Tbk on September 1, 2024 and sell it today you would earn a total of 63.00 from holding Adaro Energy Tbk or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Whitehaven Coal Limited vs. Adaro Energy Tbk
Performance |
| Timeline |
| Whitehaven Coal |
| Adaro Energy Tbk |
Whitehaven Coal and Adaro Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Whitehaven Coal and Adaro Energy
The main advantage of trading using opposite Whitehaven Coal and Adaro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitehaven Coal 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.| Whitehaven Coal vs. New Hope | Whitehaven Coal vs. Adaro Energy Tbk | Whitehaven Coal vs. Thungela Resources Limited | Whitehaven Coal vs. Yancoal Australia |
| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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