Correlation Between Adaro Energy and Geo Energy
Can any of the company-specific risk be diversified away by investing in both Adaro Energy and Geo 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 Adaro Energy and Geo Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaro Energy Tbk and Geo Energy Resources, you can compare the effects of market volatilities on Adaro Energy and Geo 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 Adaro Energy with a short position of Geo Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaro Energy and Geo Energy.
Diversification Opportunities for Adaro Energy and Geo Energy
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adaro and Geo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Adaro Energy Tbk and Geo Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Energy Resources and Adaro Energy 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 Adaro Energy Tbk are associated (or correlated) with Geo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geo Energy Resources has no effect on the direction of Adaro Energy i.e., Adaro Energy and Geo Energy go up and down completely randomly.
Pair Corralation between Adaro Energy and Geo Energy
Assuming the 90 days horizon Adaro Energy Tbk is expected to generate 2.04 times more return on investment than Geo Energy. However, Adaro Energy is 2.04 times more volatile than Geo Energy Resources. It trades about 0.1 of its potential returns per unit of risk. Geo Energy Resources is currently generating about 0.01 per unit of risk. If you would invest 971.00 in Adaro Energy Tbk on July 29, 2024 and sell it today you would earn a total of 183.00 from holding Adaro Energy Tbk or generate 18.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Adaro Energy Tbk vs. Geo Energy Resources
Performance |
Timeline |
Adaro Energy Tbk |
Geo Energy Resources |
Adaro Energy and Geo Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Adaro Energy and Geo Energy
The main advantage of trading using opposite Adaro Energy and Geo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaro Energy position performs unexpectedly, Geo 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 Geo Energy will offset losses from the drop in Geo Energy's long position.Adaro Energy vs. Thungela Resources Limited | Adaro Energy vs. Geo Energy Resources | Adaro Energy vs. Bukit Asam Tbk | Adaro Energy vs. China Shenhua Energy |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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