Correlation Between Adaro Minerals and Ulima Nitra

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

Diversification Opportunities for Adaro Minerals and Ulima Nitra

0.53

Correlation Coefficient

Adaro Minerals  Ulima Nitra

Very weak diversification

The 3 months correlation between Adaro and Ulima is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Minerals Indonesia and Ulima Nitra PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ulima Nitra PT 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 Ulima Nitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ulima Nitra PT has no effect on the direction of Adaro Minerals i.e., Adaro Minerals and Ulima Nitra go up and down completely randomly.

Pair Corralation between Adaro Minerals and Ulima Nitra

Assuming the 90 days trading horizon Adaro Minerals Indonesia is expected to under-perform the Ulima Nitra. But the stock apears to be less risky and, when comparing its historical volatility, Adaro Minerals Indonesia is 1.69 times less risky than Ulima Nitra. The stock trades about -0.02 of its potential returns per unit of risk. The Ulima Nitra PT is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,838  in Ulima Nitra PT on October 11, 2024 and sell it today you would earn a total of  43,962  from holding Ulima Nitra PT or generate 753.03% return on investment over 90 days.

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

Adaro Minerals Indonesia  vs.  Ulima Nitra PT

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.

Ulima Nitra PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ulima Nitra PT 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.

Pair Trading with Adaro Minerals and Ulima Nitra

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

The idea behind Adaro Minerals Indonesia and Ulima Nitra PT 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.