Correlation Between Embotelladora Andina and PT Astra

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

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

Diversification Opportunities for Embotelladora Andina and PT Astra

-0.4

Correlation Coefficient

Embotelladora Andina  PT Astra

Very good diversification

The 3 months correlation between Embotelladora and ASII is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Embotelladora Andina SA and PT Astra International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Astra International and Embotelladora Andina 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 Embotelladora Andina SA are associated (or correlated) with PT Astra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Astra International has no effect on the direction of Embotelladora Andina i.e., Embotelladora Andina and PT Astra go up and down completely randomly.

Pair Corralation between Embotelladora Andina and PT Astra

Assuming the 90 days horizon Embotelladora Andina SA is expected to generate 0.15 times more return on investment than PT Astra. However, Embotelladora Andina SA is 6.58 times less risky than PT Astra. It trades about 0.15 of its potential returns per unit of risk. PT Astra International is currently generating about 0.01 per unit of risk. If you would invest  1,680  in Embotelladora Andina SA on November 29, 2024 and sell it today you would earn a total of  356.00  from holding Embotelladora Andina SA or generate 21.19% return on investment over 90 days.

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

Embotelladora Andina SA  vs.  PT Astra International

Embotelladora Andina

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embotelladora Andina SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Embotelladora Andina sustained solid returns over the last few months and may actually be approaching a breakup point.

PT Astra International

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Astra International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, PT Astra is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Embotelladora Andina and PT Astra

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

The idea behind Embotelladora Andina SA and PT Astra International 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.