Correlation Between Aneka Tambang and Fortescue

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

Diversification Opportunities for Aneka Tambang and Fortescue

-0.58

Correlation Coefficient

Aneka Tambang  Fortescue

Excellent diversification

The 3 months correlation between Aneka and Fortescue is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Tbk and Fortescue in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue 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 Fortescue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Fortescue go up and down completely randomly.

Pair Corralation between Aneka Tambang and Fortescue

Assuming the 90 days trading horizon Aneka Tambang Tbk is expected to generate 0.41 times more return on investment than Fortescue. However, Aneka Tambang Tbk is 2.45 times less risky than Fortescue. It trades about 0.2 of its potential returns per unit of risk. Fortescue is currently generating about -0.08 per unit of risk. If you would invest  90.00  in Aneka Tambang Tbk on December 30, 2024 and sell it today you would earn a total of  10.00  from holding Aneka Tambang Tbk or generate 11.11% return on investment over 90 days.

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

Aneka Tambang Tbk  vs.  Fortescue

Aneka Tambang Tbk

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aneka Tambang Tbk are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Aneka Tambang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fortescue

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aneka Tambang and Fortescue

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

The idea behind Aneka Tambang Tbk and Fortescue 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.