Correlation Between PT MNC and Adaro Energy

Can any of the company-specific risk be diversified away by investing in both PT MNC and Adaro Energy 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 PT MNC and Adaro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT MNC Energy and Adaro Energy Tbk, you can compare the effects of market volatilities on PT MNC and Adaro Energy 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 PT MNC with a short position of Adaro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT MNC and Adaro Energy.

Diversification Opportunities for PT MNC and Adaro Energy

-0.02

Correlation Coefficient

PT MNC  Adaro Energy

Good diversification

The 3 months correlation between IATA and Adaro is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding PT MNC Energy and Adaro Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaro Energy Tbk and PT MNC 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 PT MNC Energy are associated (or correlated) with Adaro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaro Energy Tbk has no effect on the direction of PT MNC i.e., PT MNC and Adaro Energy go up and down completely randomly.

Pair Corralation between PT MNC and Adaro Energy

Assuming the 90 days trading horizon PT MNC Energy is expected to generate 1.06 times more return on investment than Adaro Energy. However, PT MNC is 1.06 times more volatile than Adaro Energy Tbk. It trades about 0.0 of its potential returns per unit of risk. Adaro Energy Tbk is currently generating about -0.18 per unit of risk. If you would invest  5,000  in PT MNC Energy on December 29, 2024 and sell it today you would lose (100.00) from holding PT MNC Energy or give up 2.0% of portfolio value over 90 days.

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

PT MNC Energy  vs.  Adaro Energy Tbk

PT MNC Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT MNC Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PT MNC is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Adaro Energy Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adaro Energy Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT MNC and Adaro Energy

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

The idea behind PT MNC Energy and Adaro Energy Tbk 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.