Correlation Between Indo Tambangraya and Alliance Resource

Can any of the company-specific risk be diversified away by investing in both Indo Tambangraya and Alliance Resource 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 Indo Tambangraya and Alliance Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indo Tambangraya Megah and Alliance Resource Partners, you can compare the effects of market volatilities on Indo Tambangraya and Alliance Resource 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 Indo Tambangraya with a short position of Alliance Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Tambangraya and Alliance Resource.

Diversification Opportunities for Indo Tambangraya and Alliance Resource

0.27

Correlation Coefficient

Indo Tambangraya  Alliance Resource

Modest diversification

The 3 months correlation between Indo and Alliance is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Indo Tambangraya Megah and Alliance Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Resource and Indo Tambangraya 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 Indo Tambangraya Megah are associated (or correlated) with Alliance Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Resource has no effect on the direction of Indo Tambangraya i.e., Indo Tambangraya and Alliance Resource go up and down completely randomly.

Pair Corralation between Indo Tambangraya and Alliance Resource

Assuming the 90 days horizon Indo Tambangraya Megah is expected to under-perform the Alliance Resource. In addition to that, Indo Tambangraya is 1.7 times more volatile than Alliance Resource Partners. It trades about -0.06 of its total potential returns per unit of risk. Alliance Resource Partners is currently generating about 0.06 per unit of volatility. If you would invest  2,524  in Alliance Resource Partners on December 29, 2024 and sell it today you would earn a total of  142.00  from holding Alliance Resource Partners or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Indo Tambangraya Megah  vs.  Alliance Resource Partners

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alliance Resource

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Resource Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, Alliance Resource may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Indo Tambangraya and Alliance Resource

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

The idea behind Indo Tambangraya Megah and Alliance Resource Partners 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.