Correlation Between PT Adaro and Safety Insurance

Can any of the company-specific risk be diversified away by investing in both PT Adaro and Safety Insurance 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 PT Adaro and Safety Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Adaro Energy and Safety Insurance Group, you can compare the effects of market volatilities on PT Adaro and Safety Insurance 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 PT Adaro with a short position of Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Adaro and Safety Insurance.

Diversification Opportunities for PT Adaro and Safety Insurance

-0.59

Correlation Coefficient

PT Adaro  Safety Insurance

Excellent diversification

The 3 months correlation between A64 and Safety is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding PT Adaro Energy and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance and PT Adaro 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 PT Adaro Energy are associated (or correlated) with Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of PT Adaro i.e., PT Adaro and Safety Insurance go up and down completely randomly.

Pair Corralation between PT Adaro and Safety Insurance

Assuming the 90 days horizon PT Adaro Energy is expected to under-perform the Safety Insurance. In addition to that, PT Adaro is 4.62 times more volatile than Safety Insurance Group. It trades about -0.01 of its total potential returns per unit of risk. Safety Insurance Group is currently generating about 0.11 per unit of volatility. If you would invest  7,119  in Safety Insurance Group on September 20, 2024 and sell it today you would earn a total of  781.00  from holding Safety Insurance Group or generate 10.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PT Adaro Energy  vs.  Safety Insurance Group

PT Adaro Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Adaro Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Adaro is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Safety Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Adaro and Safety Insurance

The main advantage of trading using opposite PT Adaro and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Adaro position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.

The idea behind PT Adaro Energy and Safety Insurance Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.