Correlation Between Astra Agro and Bakrie Sumatera

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

By analyzing existing cross correlation between Astra Agro Lestari and Bakrie Sumatera Plantations, you can compare the effects of market volatilities on Astra Agro and Bakrie Sumatera 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 Agro with a short position of Bakrie Sumatera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra Agro and Bakrie Sumatera.

Diversification Opportunities for Astra Agro and Bakrie Sumatera

0.2

Correlation Coefficient

Astra Agro  Bakrie Sumatera

Modest diversification

The 3 months correlation between Astra and Bakrie is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Astra Agro Lestari and Bakrie Sumatera Plantations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bakrie Sumatera Plan and Astra Agro 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 Agro Lestari are associated (or correlated) with Bakrie Sumatera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bakrie Sumatera Plan has no effect on the direction of Astra Agro i.e., Astra Agro and Bakrie Sumatera go up and down completely randomly.

Pair Corralation between Astra Agro and Bakrie Sumatera

Assuming the 90 days trading horizon Astra Agro Lestari is expected to generate 0.53 times more return on investment than Bakrie Sumatera. However, Astra Agro Lestari is 1.87 times less risky than Bakrie Sumatera. It trades about -0.21 of its potential returns per unit of risk. Bakrie Sumatera Plantations is currently generating about -0.12 per unit of risk. If you would invest  587,500  in Astra Agro Lestari on December 2, 2024 and sell it today you would lose (42,500) from holding Astra Agro Lestari or give up 7.23% of portfolio value over 90 days.

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

Astra Agro Lestari  vs.  Bakrie Sumatera Plantations

Astra Agro Lestari

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astra Agro Lestari has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bakrie Sumatera Plan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bakrie Sumatera Plantations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Astra Agro and Bakrie Sumatera

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

The idea behind Astra Agro Lestari and Bakrie Sumatera Plantations 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..