Correlation Between Aneka Tambang and Terregra Asia

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

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

Diversification Opportunities for Aneka Tambang and Terregra Asia

-0.34

Correlation Coefficient

Aneka Tambang  Terregra Asia

Very good diversification

The 3 months correlation between Aneka and Terregra is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Persero and Terregra Asia Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terregra Asia Energy and Aneka Tambang 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 Aneka Tambang Persero are associated (or correlated) with Terregra Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terregra Asia Energy has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Terregra Asia go up and down completely randomly.

Pair Corralation between Aneka Tambang and Terregra Asia

Assuming the 90 days trading horizon Aneka Tambang is expected to generate 1.38 times less return on investment than Terregra Asia. But when comparing it to its historical volatility, Aneka Tambang Persero is 1.74 times less risky than Terregra Asia. It trades about 0.06 of its potential returns per unit of risk. Terregra Asia Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,100  in Terregra Asia Energy on December 30, 2024 and sell it today you would earn a total of  200.00  from holding Terregra Asia Energy or generate 6.45% return on investment over 90 days.

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

Aneka Tambang Persero  vs.  Terregra Asia Energy

Aneka Tambang Persero

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aneka Tambang Persero are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Aneka Tambang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Terregra Asia Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Terregra Asia Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Terregra Asia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aneka Tambang and Terregra Asia

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

The idea behind Aneka Tambang Persero and Terregra Asia 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.