Correlation Between Aneka Tambang and Vulcan Steel

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

Diversification Opportunities for Aneka Tambang and Vulcan Steel

0.77

Correlation Coefficient

Aneka Tambang  Vulcan Steel

Poor diversification

The 3 months correlation between Aneka and Vulcan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aneka Tambang Tbk and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel 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 Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of Aneka Tambang i.e., Aneka Tambang and Vulcan Steel go up and down completely randomly.

Pair Corralation between Aneka Tambang and Vulcan Steel

Assuming the 90 days trading horizon Aneka Tambang is expected to generate 1.45 times less return on investment than Vulcan Steel. But when comparing it to its historical volatility, Aneka Tambang Tbk is 3.78 times less risky than Vulcan Steel. It trades about 0.2 of its potential returns per unit of risk. Vulcan Steel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  724.00  in Vulcan Steel on December 29, 2024 and sell it today you would earn a total of  95.00  from holding Vulcan Steel or generate 13.12% return on investment over 90 days.

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

Aneka Tambang Tbk  vs.  Vulcan Steel

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.

Vulcan Steel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Steel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Vulcan Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aneka Tambang and Vulcan Steel

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

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