Correlation Between Vale Indonesia and Aneka Tambang

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

By analyzing existing cross correlation between Vale Indonesia Tbk and Aneka Tambang Persero, you can compare the effects of market volatilities on Vale Indonesia and Aneka Tambang 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 Vale Indonesia with a short position of Aneka Tambang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Aneka Tambang.

Diversification Opportunities for Vale Indonesia and Aneka Tambang

-0.4

Correlation Coefficient

Vale Indonesia  Aneka Tambang

Very good diversification

The 3 months correlation between Vale and Aneka is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Aneka Tambang Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aneka Tambang Persero and Vale Indonesia 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 Vale Indonesia Tbk are associated (or correlated) with Aneka Tambang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aneka Tambang Persero has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Aneka Tambang go up and down completely randomly.

Pair Corralation between Vale Indonesia and Aneka Tambang

Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Aneka Tambang. In addition to that, Vale Indonesia is 1.37 times more volatile than Aneka Tambang Persero. It trades about -0.19 of its total potential returns per unit of risk. Aneka Tambang Persero is currently generating about 0.06 per unit of volatility. If you would invest  152,500  in Aneka Tambang Persero on December 30, 2024 and sell it today you would earn a total of  11,000  from holding Aneka Tambang Persero or generate 7.21% return on investment over 90 days.

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

Vale Indonesia Tbk  vs.  Aneka Tambang Persero

Vale Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vale Indonesia 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.

Aneka Tambang Persero

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aneka Tambang Persero are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Aneka Tambang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vale Indonesia and Aneka Tambang

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

The idea behind Vale Indonesia Tbk and Aneka Tambang Persero 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.