Correlation Between Austindo Nusantara and Provident Agro

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

By analyzing existing cross correlation between Austindo Nusantara Jaya and Provident Agro Tbk, you can compare the effects of market volatilities on Austindo Nusantara and Provident Agro 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 Austindo Nusantara with a short position of Provident Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austindo Nusantara and Provident Agro.

Diversification Opportunities for Austindo Nusantara and Provident Agro

-0.84

Correlation Coefficient

Austindo Nusantara  Provident Agro

Pay attention - limited upside

The 3 months correlation between Austindo and Provident is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Austindo Nusantara Jaya and Provident Agro Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Agro Tbk and Austindo Nusantara 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 Austindo Nusantara Jaya are associated (or correlated) with Provident Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Agro Tbk has no effect on the direction of Austindo Nusantara i.e., Austindo Nusantara and Provident Agro go up and down completely randomly.

Pair Corralation between Austindo Nusantara and Provident Agro

Assuming the 90 days trading horizon Austindo Nusantara Jaya is expected to generate 0.87 times more return on investment than Provident Agro. However, Austindo Nusantara Jaya is 1.15 times less risky than Provident Agro. It trades about 0.18 of its potential returns per unit of risk. Provident Agro Tbk is currently generating about -0.17 per unit of risk. If you would invest  73,500  in Austindo Nusantara Jaya on November 29, 2024 and sell it today you would earn a total of  16,500  from holding Austindo Nusantara Jaya or generate 22.45% return on investment over 90 days.

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

Austindo Nusantara Jaya  vs.  Provident Agro Tbk

Austindo Nusantara Jaya

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara disclosed solid returns over the last few months and may actually be approaching a breakup point.

Provident Agro Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Provident Agro Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Austindo Nusantara and Provident Agro

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

The idea behind Austindo Nusantara Jaya and Provident Agro Tbk 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.