Correlation Between Putra Mandiri and Adaro Minerals

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

By analyzing existing cross correlation between Putra Mandiri Jembar and Adaro Minerals Indonesia, you can compare the effects of market volatilities on Putra Mandiri and Adaro Minerals 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 Putra Mandiri with a short position of Adaro Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putra Mandiri and Adaro Minerals.

Diversification Opportunities for Putra Mandiri and Adaro Minerals

0.5

Correlation Coefficient

Putra Mandiri  Adaro Minerals

Very weak diversification

The 3 months correlation between Putra and Adaro is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Putra Mandiri Jembar and Adaro Minerals Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaro Minerals Indonesia and Putra Mandiri 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 Putra Mandiri Jembar are associated (or correlated) with Adaro Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaro Minerals Indonesia has no effect on the direction of Putra Mandiri i.e., Putra Mandiri and Adaro Minerals go up and down completely randomly.

Pair Corralation between Putra Mandiri and Adaro Minerals

Assuming the 90 days trading horizon Putra Mandiri Jembar is expected to under-perform the Adaro Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Putra Mandiri Jembar is 1.39 times less risky than Adaro Minerals. The stock trades about -0.01 of its potential returns per unit of risk. The Adaro Minerals Indonesia is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  169,500  in Adaro Minerals Indonesia on September 4, 2024 and sell it today you would lose (43,000) from holding Adaro Minerals Indonesia or give up 25.37% of portfolio value over 90 days.

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

Putra Mandiri Jembar  vs.  Adaro Minerals Indonesia

Putra Mandiri Jembar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putra Mandiri Jembar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Putra Mandiri may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Adaro Minerals Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Putra Mandiri and Adaro Minerals

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

The idea behind Putra Mandiri Jembar and Adaro Minerals Indonesia 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.