Correlation Between Adaro Minerals and Prima Andalan

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

Diversification Opportunities for Adaro Minerals and Prima Andalan

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Adaro and Prima is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Minerals Indonesia and Prima Andalan Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prima Andalan 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 Prima Andalan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prima Andalan Mandiri has no effect on the direction of Adaro Minerals i.e., Adaro Minerals and Prima Andalan go up and down completely randomly.

Pair Corralation between Adaro Minerals and Prima Andalan

Assuming the 90 days trading horizon Adaro Minerals Indonesia is expected to under-perform the Prima Andalan. In addition to that, Adaro Minerals is 2.42 times more volatile than Prima Andalan Mandiri. It trades about -0.16 of its total potential returns per unit of risk. Prima Andalan Mandiri is currently generating about -0.12 per unit of volatility. If you would invest  558,225  in Prima Andalan Mandiri on September 28, 2024 and sell it today you would lose (38,225) from holding Prima Andalan Mandiri or give up 6.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Adaro Minerals Indonesia  vs.  Prima Andalan Mandiri

 Performance 
       Timeline  
Adaro Minerals Indonesia 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Prima Andalan Mandiri 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Prima Andalan Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Adaro Minerals and Prima Andalan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adaro Minerals and Prima Andalan

The main advantage of trading using opposite Adaro Minerals and Prima Andalan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Minerals position performs unexpectedly, Prima Andalan 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 Prima Andalan will offset losses from the drop in Prima Andalan's long position.
The idea behind Adaro Minerals Indonesia and Prima Andalan 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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