Correlation Between Aneka Tambang and Tabcorp Holdings

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

Diversification Opportunities for Aneka Tambang and Tabcorp Holdings

-0.65

Correlation Coefficient

Aneka Tambang  Tabcorp Holdings

Excellent diversification

The 3 months correlation between Aneka and Tabcorp is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Tbk and Tabcorp Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tabcorp Holdings 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 Tabcorp Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tabcorp Holdings has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Tabcorp Holdings go up and down completely randomly.

Pair Corralation between Aneka Tambang and Tabcorp Holdings

Assuming the 90 days trading horizon Aneka Tambang Tbk is expected to under-perform the Tabcorp Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Aneka Tambang Tbk is 1.26 times less risky than Tabcorp Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The Tabcorp Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Tabcorp Holdings on September 13, 2024 and sell it today you would earn a total of  12.00  from holding Tabcorp Holdings or generate 26.67% return on investment over 90 days.

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

Aneka Tambang Tbk  vs.  Tabcorp Holdings

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.

Tabcorp Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tabcorp Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Tabcorp Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aneka Tambang and Tabcorp Holdings

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

The idea behind Aneka Tambang Tbk and Tabcorp Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.