Correlation Between Adaro Energy and Transkon Jaya

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

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

Diversification Opportunities for Adaro Energy and Transkon Jaya

-0.56

Correlation Coefficient

Adaro Energy  Transkon Jaya

Excellent diversification

The 3 months correlation between Adaro and Transkon is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and Transkon Jaya Pt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transkon Jaya Pt and Adaro Energy 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 Adaro Energy Tbk are associated (or correlated) with Transkon Jaya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transkon Jaya Pt has no effect on the direction of Adaro Energy i.e., Adaro Energy and Transkon Jaya go up and down completely randomly.

Pair Corralation between Adaro Energy and Transkon Jaya

Assuming the 90 days trading horizon Adaro Energy Tbk is expected to generate 1.24 times more return on investment than Transkon Jaya. However, Adaro Energy is 1.24 times more volatile than Transkon Jaya Pt. It trades about 0.06 of its potential returns per unit of risk. Transkon Jaya Pt is currently generating about -0.01 per unit of risk. If you would invest  118,731  in Adaro Energy Tbk on September 28, 2024 and sell it today you would earn a total of  132,269  from holding Adaro Energy Tbk or generate 111.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Adaro Energy Tbk  vs.  Transkon Jaya Pt

Adaro Energy Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adaro Energy Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Adaro Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Transkon Jaya Pt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transkon Jaya Pt has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Adaro Energy and Transkon Jaya

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

The idea behind Adaro Energy Tbk and Transkon Jaya Pt 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.