Correlation Between Allison Transmission and PT Astra

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

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

Diversification Opportunities for Allison Transmission and PT Astra

-0.17

Correlation Coefficient

Allison Transmission  PT Astra

Good diversification

The 3 months correlation between Allison and PTAIF is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Allison Transmission Holdings 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 Allison Transmission 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 Allison Transmission Holdings 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 Allison Transmission i.e., Allison Transmission and PT Astra go up and down completely randomly.

Pair Corralation between Allison Transmission and PT Astra

Given the investment horizon of 90 days Allison Transmission Holdings is expected to under-perform the PT Astra. But the stock apears to be less risky and, when comparing its historical volatility, Allison Transmission Holdings is 1.57 times less risky than PT Astra. The stock trades about -0.07 of its potential returns per unit of risk. The PT Astra International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  27.00  in PT Astra International on December 29, 2024 and sell it today you would earn a total of  1.00  from holding PT Astra International or generate 3.7% return on investment over 90 days.

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

Allison Transmission Holdings  vs.  PT Astra International

Allison Transmission

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allison Transmission Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

PT Astra International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, PT Astra may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Allison Transmission and PT Astra

The main advantage of trading using opposite Allison Transmission and PT Astra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allison Transmission 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 Allison Transmission Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.