Correlation Between Astra Graphia and Lautan Luas

Can any of the company-specific risk be diversified away by investing in both Astra Graphia and Lautan Luas 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 Lautan Luas 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 Lautan Luas Tbk, you can compare the effects of market volatilities on Astra Graphia and Lautan Luas 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 Lautan Luas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra Graphia and Lautan Luas.

Diversification Opportunities for Astra Graphia and Lautan Luas

0.41

Correlation Coefficient

Astra Graphia  Lautan Luas

Very weak diversification

The 3 months correlation between Astra and Lautan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Astra Graphia Tbk and Lautan Luas Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lautan Luas 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 Lautan Luas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lautan Luas Tbk has no effect on the direction of Astra Graphia i.e., Astra Graphia and Lautan Luas go up and down completely randomly.

Pair Corralation between Astra Graphia and Lautan Luas

Assuming the 90 days trading horizon Astra Graphia Tbk is expected to generate 1.6 times more return on investment than Lautan Luas. However, Astra Graphia is 1.6 times more volatile than Lautan Luas Tbk. It trades about 0.06 of its potential returns per unit of risk. Lautan Luas Tbk is currently generating about 0.01 per unit of risk. If you would invest  81,676  in Astra Graphia Tbk on August 31, 2024 and sell it today you would earn a total of  3,324  from holding Astra Graphia Tbk or generate 4.07% return on investment over 90 days.

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

Astra Graphia Tbk  vs.  Lautan Luas Tbk

Astra Graphia Tbk

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Graphia Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Lautan Luas Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lautan Luas Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Lautan Luas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Astra Graphia and Lautan Luas

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

The idea behind Astra Graphia Tbk and Lautan Luas 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.