Correlation Between Astra International and Cikarang Listrindo

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

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

Diversification Opportunities for Astra International and Cikarang Listrindo

0.23

Correlation Coefficient

Astra International  Cikarang Listrindo

Modest diversification

The 3 months correlation between Astra and Cikarang is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and Cikarang Listrindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cikarang Listrindo Tbk and Astra International 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 International Tbk are associated (or correlated) with Cikarang Listrindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cikarang Listrindo Tbk has no effect on the direction of Astra International i.e., Astra International and Cikarang Listrindo go up and down completely randomly.

Pair Corralation between Astra International and Cikarang Listrindo

Assuming the 90 days trading horizon Astra International is expected to generate 7.08 times less return on investment than Cikarang Listrindo. In addition to that, Astra International is 1.75 times more volatile than Cikarang Listrindo Tbk. It trades about 0.01 of its total potential returns per unit of risk. Cikarang Listrindo Tbk is currently generating about 0.09 per unit of volatility. If you would invest  67,500  in Cikarang Listrindo Tbk on September 2, 2024 and sell it today you would earn a total of  3,500  from holding Cikarang Listrindo Tbk or generate 5.19% return on investment over 90 days.

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

Astra International Tbk  vs.  Cikarang Listrindo Tbk

Astra International Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cikarang Listrindo Tbk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cikarang Listrindo Tbk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Cikarang Listrindo 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 International and Cikarang Listrindo

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

The idea behind Astra International Tbk and Cikarang Listrindo 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.