Correlation Between Aneka Tambang and Indika Energy

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

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

Diversification Opportunities for Aneka Tambang and Indika Energy

0.51

Correlation Coefficient

Aneka Tambang  Indika Energy

Very weak diversification

The 3 months correlation between Aneka and Indika is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Persero and Indika Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indika Energy Tbk and Aneka Tambang 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 Aneka Tambang Persero are associated (or correlated) with Indika Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indika Energy Tbk has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Indika Energy go up and down completely randomly.

Pair Corralation between Aneka Tambang and Indika Energy

Assuming the 90 days trading horizon Aneka Tambang Persero is expected to generate 0.99 times more return on investment than Indika Energy. However, Aneka Tambang Persero is 1.01 times less risky than Indika Energy. It trades about 0.01 of its potential returns per unit of risk. Indika Energy Tbk is currently generating about -0.08 per unit of risk. If you would invest  144,000  in Aneka Tambang Persero on September 25, 2024 and sell it today you would lose (500.00) from holding Aneka Tambang Persero or give up 0.35% of portfolio value over 90 days.

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

Aneka Tambang Persero  vs.  Indika Energy Tbk

Aneka Tambang Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aneka Tambang Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Aneka Tambang is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Indika Energy Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indika Energy Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aneka Tambang and Indika Energy

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

The idea behind Aneka Tambang Persero and Indika Energy Tbk 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.