Correlation Between Aneka Tambang and Horseshoe Metals

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

By analyzing existing cross correlation between Aneka Tambang Tbk and Horseshoe Metals, you can compare the effects of market volatilities on Aneka Tambang and Horseshoe Metals 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 Horseshoe Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aneka Tambang and Horseshoe Metals.

Diversification Opportunities for Aneka Tambang and Horseshoe Metals

-0.8

Correlation Coefficient

Aneka Tambang  Horseshoe Metals

Pay attention - limited upside

The 3 months correlation between Aneka and Horseshoe is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Tbk and Horseshoe Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horseshoe Metals 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 Tbk are associated (or correlated) with Horseshoe Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horseshoe Metals has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Horseshoe Metals go up and down completely randomly.

Pair Corralation between Aneka Tambang and Horseshoe Metals

Assuming the 90 days trading horizon Aneka Tambang Tbk is expected to under-perform the Horseshoe Metals. But the stock apears to be less risky and, when comparing its historical volatility, Aneka Tambang Tbk is 4.56 times less risky than Horseshoe Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Horseshoe Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.70  in Horseshoe Metals on September 3, 2024 and sell it today you would earn a total of  0.30  from holding Horseshoe Metals or generate 42.86% return on investment over 90 days.

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

Aneka Tambang Tbk  vs.  Horseshoe Metals

Aneka Tambang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aneka Tambang Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Horseshoe Metals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horseshoe Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Horseshoe Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aneka Tambang and Horseshoe Metals

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

The idea behind Aneka Tambang Tbk and Horseshoe Metals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.