Correlation Between Adaro Energy and Hallador Energy

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

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

Diversification Opportunities for Adaro Energy and Hallador Energy

-0.06

Correlation Coefficient

Adaro Energy  Hallador Energy

Good diversification

The 3 months correlation between Adaro and Hallador is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and Hallador Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hallador Energy and Adaro Energy 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 Energy Tbk are associated (or correlated) with Hallador Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hallador Energy has no effect on the direction of Adaro Energy i.e., Adaro Energy and Hallador Energy go up and down completely randomly.

Pair Corralation between Adaro Energy and Hallador Energy

Assuming the 90 days horizon Adaro Energy is expected to generate 10.28 times less return on investment than Hallador Energy. But when comparing it to its historical volatility, Adaro Energy Tbk is 1.4 times less risky than Hallador Energy. It trades about 0.03 of its potential returns per unit of risk. Hallador Energy is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  671.00  in Hallador Energy on August 30, 2024 and sell it today you would earn a total of  554.00  from holding Hallador Energy or generate 82.56% return on investment over 90 days.

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

Adaro Energy Tbk  vs.  Hallador Energy

Adaro Energy Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adaro Energy Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Adaro Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Hallador Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hallador Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hallador Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adaro Energy and Hallador Energy

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

The idea behind Adaro Energy Tbk and Hallador 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.

Check out your portfolio center.

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.