Correlation Between Adaro Minerals and Bintang Samudera

Can any of the company-specific risk be diversified away by investing in both Adaro Minerals and Bintang Samudera 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 Bintang Samudera 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 Bintang Samudera Mandiri, you can compare the effects of market volatilities on Adaro Minerals and Bintang Samudera 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 Bintang Samudera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Minerals and Bintang Samudera.

Diversification Opportunities for Adaro Minerals and Bintang Samudera

-0.76

Correlation Coefficient

Adaro Minerals  Bintang Samudera

Pay attention - limited upside

The 3 months correlation between Adaro and Bintang is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Minerals Indonesia and Bintang Samudera Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bintang Samudera Mandiri 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 Bintang Samudera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bintang Samudera Mandiri has no effect on the direction of Adaro Minerals i.e., Adaro Minerals and Bintang Samudera go up and down completely randomly.

Pair Corralation between Adaro Minerals and Bintang Samudera

Assuming the 90 days trading horizon Adaro Minerals Indonesia is expected to under-perform the Bintang Samudera. But the stock apears to be less risky and, when comparing its historical volatility, Adaro Minerals Indonesia is 1.15 times less risky than Bintang Samudera. The stock trades about -0.22 of its potential returns per unit of risk. The Bintang Samudera Mandiri is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  13,700  in Bintang Samudera Mandiri on October 27, 2024 and sell it today you would earn a total of  400.00  from holding Bintang Samudera Mandiri or generate 2.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Adaro Minerals Indonesia  vs.  Bintang Samudera Mandiri

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bintang Samudera Mandiri

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bintang Samudera Mandiri are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bintang Samudera disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adaro Minerals and Bintang Samudera

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

The idea behind Adaro Minerals Indonesia and Bintang Samudera Mandiri 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.