Correlation Between Visa and PT Adaro

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Can any of the company-specific risk be diversified away by investing in both Visa and PT Adaro 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 Visa and PT Adaro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and PT Adaro Energy, you can compare the effects of market volatilities on Visa and PT Adaro 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 Visa with a short position of PT Adaro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and PT Adaro.

Diversification Opportunities for Visa and PT Adaro

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Visa and A64 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and PT Adaro Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Adaro Energy and Visa 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 Visa Class A are associated (or correlated) with PT Adaro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Adaro Energy has no effect on the direction of Visa i.e., Visa and PT Adaro go up and down completely randomly.

Pair Corralation between Visa and PT Adaro

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.17 times more return on investment than PT Adaro. However, Visa Class A is 5.81 times less risky than PT Adaro. It trades about 0.15 of its potential returns per unit of risk. PT Adaro Energy is currently generating about -0.03 per unit of risk. If you would invest  28,469  in Visa Class A on September 19, 2024 and sell it today you would earn a total of  3,361  from holding Visa Class A or generate 11.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

Visa Class A  vs.  PT Adaro Energy

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.
PT Adaro Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PT Adaro Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Visa and PT Adaro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and PT Adaro

The main advantage of trading using opposite Visa and PT Adaro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, PT Adaro 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 PT Adaro will offset losses from the drop in PT Adaro's long position.
The idea behind Visa Class A and PT Adaro Energy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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