Correlation Between Timah Persero and Aneka Tambang

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

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

Diversification Opportunities for Timah Persero and Aneka Tambang

0.79

Correlation Coefficient

Timah Persero  Aneka Tambang

Poor diversification

The 3 months correlation between Timah and Aneka is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Timah Persero Tbk and Aneka Tambang Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aneka Tambang Persero and Timah Persero 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 Timah Persero Tbk are associated (or correlated) with Aneka Tambang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aneka Tambang Persero has no effect on the direction of Timah Persero i.e., Timah Persero and Aneka Tambang go up and down completely randomly.

Pair Corralation between Timah Persero and Aneka Tambang

Assuming the 90 days trading horizon Timah Persero Tbk is expected to under-perform the Aneka Tambang. In addition to that, Timah Persero is 1.41 times more volatile than Aneka Tambang Persero. It trades about -0.08 of its total potential returns per unit of risk. Aneka Tambang Persero is currently generating about -0.01 per unit of volatility. If you would invest  163,000  in Aneka Tambang Persero on September 13, 2024 and sell it today you would lose (4,500) from holding Aneka Tambang Persero or give up 2.76% of portfolio value over 90 days.

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

Timah Persero Tbk  vs.  Aneka Tambang Persero

Timah Persero Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Timah Persero Tbk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Timah Persero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aneka Tambang Persero

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aneka Tambang Persero are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Aneka Tambang disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timah Persero and Aneka Tambang

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

The idea behind Timah Persero Tbk and Aneka Tambang Persero 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.