Correlation Between Adaro Energy and Windrock Land

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

Diversification Opportunities for Adaro Energy and Windrock Land

-0.19

Correlation Coefficient

Adaro Energy  Windrock Land

Good diversification

The 3 months correlation between Adaro and Windrock is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and Windrock Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Windrock Land 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 Windrock Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Windrock Land has no effect on the direction of Adaro Energy i.e., Adaro Energy and Windrock Land go up and down completely randomly.

Pair Corralation between Adaro Energy and Windrock Land

Assuming the 90 days horizon Adaro Energy Tbk is expected to generate 4.85 times more return on investment than Windrock Land. However, Adaro Energy is 4.85 times more volatile than Windrock Land Co. It trades about 0.02 of its potential returns per unit of risk. Windrock Land Co is currently generating about 0.03 per unit of risk. If you would invest  1,192  in Adaro Energy Tbk on September 13, 2024 and sell it today you would lose (45.00) from holding Adaro Energy Tbk or give up 3.78% of portfolio value over 90 days.

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

Adaro Energy Tbk  vs.  Windrock Land Co

Adaro Energy Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adaro Energy Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Adaro Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Windrock Land

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Windrock Land Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Windrock Land is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adaro Energy and Windrock Land

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

The idea behind Adaro Energy Tbk and Windrock Land Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.