Correlation Between Delta Dunia and Adaro Energy

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

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

Diversification Opportunities for Delta Dunia and Adaro Energy

-0.43

Correlation Coefficient

Delta Dunia  Adaro Energy

Very good diversification

The 3 months correlation between Delta and Adaro is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Delta Dunia Makmur 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 Delta Dunia 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 Delta Dunia Makmur 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 Delta Dunia i.e., Delta Dunia and Adaro Energy go up and down completely randomly.

Pair Corralation between Delta Dunia and Adaro Energy

Assuming the 90 days trading horizon Delta Dunia Makmur is expected to under-perform the Adaro Energy. But the stock apears to be less risky and, when comparing its historical volatility, Delta Dunia Makmur is 2.66 times less risky than Adaro Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Adaro Energy Tbk is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  190,973  in Adaro Energy Tbk on September 17, 2024 and sell it today you would earn a total of  67,027  from holding Adaro Energy Tbk or generate 35.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Delta Dunia Makmur  vs.  Adaro Energy Tbk

Delta Dunia Makmur

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delta Dunia Makmur 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.

Adaro Energy Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adaro Energy Tbk are ranked lower than 7 (%) 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.

Pair Trading with Delta Dunia and Adaro Energy

The main advantage of trading using opposite Delta Dunia and Adaro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Dunia 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.

The idea behind Delta Dunia Makmur and Adaro 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.

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.