Correlation Between Astra Graphia and Polychem Indonesia

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

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

Diversification Opportunities for Astra Graphia and Polychem Indonesia

0.76

Correlation Coefficient

Astra Graphia  Polychem Indonesia

Poor diversification

The 3 months correlation between Astra and Polychem is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Astra Graphia Tbk and Polychem Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polychem Indonesia Tbk and Astra Graphia 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 Graphia Tbk are associated (or correlated) with Polychem Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polychem Indonesia Tbk has no effect on the direction of Astra Graphia i.e., Astra Graphia and Polychem Indonesia go up and down completely randomly.

Pair Corralation between Astra Graphia and Polychem Indonesia

Assuming the 90 days trading horizon Astra Graphia Tbk is expected to generate 0.94 times more return on investment than Polychem Indonesia. However, Astra Graphia Tbk is 1.06 times less risky than Polychem Indonesia. It trades about -0.06 of its potential returns per unit of risk. Polychem Indonesia Tbk is currently generating about -0.07 per unit of risk. If you would invest  86,500  in Astra Graphia Tbk on December 30, 2024 and sell it today you would lose (4,500) from holding Astra Graphia Tbk or give up 5.2% of portfolio value over 90 days.

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

Astra Graphia Tbk  vs.  Polychem Indonesia Tbk

Astra Graphia Tbk

Risk-Adjusted Performance

Very Weak

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

Polychem Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polychem Indonesia Tbk 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 Graphia and Polychem Indonesia

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

The idea behind Astra Graphia Tbk and Polychem Indonesia 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..