Correlation Between AIM Energy and Adaro Energy

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

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

Diversification Opportunities for AIM Energy and Adaro Energy

0.0

Correlation Coefficient

AIM Energy  Adaro Energy

Pay attention - limited upside

The 3 months correlation between AIM and Adaro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AIM Energy and Adaro Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaro Energy Tbk and AIM 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 AIM Energy are associated (or correlated) with Adaro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaro Energy Tbk has no effect on the direction of AIM Energy i.e., AIM Energy and Adaro Energy go up and down completely randomly.

Pair Corralation between AIM Energy and Adaro Energy

If you would invest  547.00  in Adaro Energy Tbk on October 9, 2024 and sell it today you would earn a total of  453.00  from holding Adaro Energy Tbk or generate 82.82% return on investment over 90 days.

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

AIM Energy  vs.  Adaro Energy Tbk

AIM Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIM Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AIM Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Adaro Energy Tbk

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adaro Energy Tbk are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Adaro Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIM Energy and Adaro Energy

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

The idea behind AIM Energy and Adaro Energy Tbk 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.