Correlation Between Adaro Minerals and Maming Enam

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

By analyzing existing cross correlation between Adaro Minerals Indonesia and Maming Enam Sembilan, you can compare the effects of market volatilities on Adaro Minerals and Maming Enam 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 Adaro Minerals with a short position of Maming Enam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Minerals and Maming Enam.

Diversification Opportunities for Adaro Minerals and Maming Enam

0.62

Correlation Coefficient

Adaro Minerals  Maming Enam

Poor diversification

The 3 months correlation between Adaro and Maming is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Minerals Indonesia and Maming Enam Sembilan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maming Enam Sembilan and Adaro Minerals 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 Adaro Minerals Indonesia are associated (or correlated) with Maming Enam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maming Enam Sembilan has no effect on the direction of Adaro Minerals i.e., Adaro Minerals and Maming Enam go up and down completely randomly.

Pair Corralation between Adaro Minerals and Maming Enam

Assuming the 90 days trading horizon Adaro Minerals Indonesia is expected to generate 0.45 times more return on investment than Maming Enam. However, Adaro Minerals Indonesia is 2.2 times less risky than Maming Enam. It trades about -0.22 of its potential returns per unit of risk. Maming Enam Sembilan is currently generating about -0.14 per unit of risk. If you would invest  141,000  in Adaro Minerals Indonesia on August 31, 2024 and sell it today you would lose (13,500) from holding Adaro Minerals Indonesia or give up 9.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Adaro Minerals Indonesia  vs.  Maming Enam Sembilan

Adaro Minerals Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Maming Enam Sembilan

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maming Enam Sembilan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Maming Enam disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adaro Minerals and Maming Enam

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

The idea behind Adaro Minerals Indonesia and Maming Enam Sembilan 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.