Correlation Between PT Astra and Premium Brands

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

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

Diversification Opportunities for PT Astra and Premium Brands

0.16

Correlation Coefficient

PT Astra  Premium Brands

Average diversification

The 3 months correlation between ASII and Premium is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings and PT Astra 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 PT Astra International are associated (or correlated) with Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of PT Astra i.e., PT Astra and Premium Brands go up and down completely randomly.

Pair Corralation between PT Astra and Premium Brands

Given the investment horizon of 90 days PT Astra International is expected to generate 13.72 times more return on investment than Premium Brands. However, PT Astra is 13.72 times more volatile than Premium Brands Holdings. It trades about 0.08 of its potential returns per unit of risk. Premium Brands Holdings is currently generating about 0.01 per unit of risk. If you would invest  0.04  in PT Astra International on December 28, 2024 and sell it today you would lose (0.01) from holding PT Astra International or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

PT Astra International  vs.  Premium Brands Holdings

PT Astra International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, PT Astra demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Premium Brands Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Premium Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Astra and Premium Brands

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

The idea behind PT Astra International and Premium Brands Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.