Correlation Between Aneka Tambang and Encounter Resources

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

By analyzing existing cross correlation between Aneka Tambang Tbk and Encounter Resources, you can compare the effects of market volatilities on Aneka Tambang and Encounter Resources 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 Encounter Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aneka Tambang and Encounter Resources.

Diversification Opportunities for Aneka Tambang and Encounter Resources

0.6

Correlation Coefficient

Aneka Tambang  Encounter Resources

Poor diversification

The 3 months correlation between Aneka and Encounter is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Tbk and Encounter Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Resources 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 Tbk are associated (or correlated) with Encounter Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Resources has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Encounter Resources go up and down completely randomly.

Pair Corralation between Aneka Tambang and Encounter Resources

Assuming the 90 days trading horizon Aneka Tambang Tbk is expected to under-perform the Encounter Resources. But the stock apears to be less risky and, when comparing its historical volatility, Aneka Tambang Tbk is 5.18 times less risky than Encounter Resources. The stock trades about -0.03 of its potential returns per unit of risk. The Encounter Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Encounter Resources on September 24, 2024 and sell it today you would lose (9.00) from holding Encounter Resources or give up 21.43% of portfolio value over 90 days.

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

Aneka Tambang Tbk  vs.  Encounter Resources

Aneka Tambang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aneka Tambang Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Encounter Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encounter Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aneka Tambang and Encounter Resources

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

The idea behind Aneka Tambang Tbk and Encounter Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..