Correlation Between Astra International and Sumber Alfaria

Can any of the company-specific risk be diversified away by investing in both Astra International and Sumber Alfaria 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 Astra International and Sumber Alfaria into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Astra International Tbk and Sumber Alfaria Trijaya, you can compare the effects of market volatilities on Astra International and Sumber Alfaria 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 Astra International with a short position of Sumber Alfaria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra International and Sumber Alfaria.

Diversification Opportunities for Astra International and Sumber Alfaria

-0.12

Correlation Coefficient

Astra International  Sumber Alfaria

Good diversification

The 3 months correlation between Astra and Sumber is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and Sumber Alfaria Trijaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumber Alfaria Trijaya and Astra International 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 Astra International Tbk are associated (or correlated) with Sumber Alfaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumber Alfaria Trijaya has no effect on the direction of Astra International i.e., Astra International and Sumber Alfaria go up and down completely randomly.

Pair Corralation between Astra International and Sumber Alfaria

Assuming the 90 days trading horizon Astra International is expected to generate 6.69 times less return on investment than Sumber Alfaria. But when comparing it to its historical volatility, Astra International Tbk is 1.03 times less risky than Sumber Alfaria. It trades about 0.01 of its potential returns per unit of risk. Sumber Alfaria Trijaya is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  269,000  in Sumber Alfaria Trijaya on February 26, 2024 and sell it today you would earn a total of  14,000  from holding Sumber Alfaria Trijaya or generate 5.2% return on investment over 90 days.

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

Astra International Tbk  vs.  Sumber Alfaria Trijaya

Astra International Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sumber Alfaria Trijaya

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumber Alfaria Trijaya are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sumber Alfaria may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Astra International and Sumber Alfaria

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

The idea behind Astra International Tbk and Sumber Alfaria Trijaya 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..