Correlation Between PT Astra and Aptiv PLC

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

Diversification Opportunities for PT Astra and Aptiv PLC

0.1

Correlation Coefficient

PT Astra  Aptiv PLC

Average diversification

The 3 months correlation between ASJA and Aptiv is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC 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 Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of PT Astra i.e., PT Astra and Aptiv PLC go up and down completely randomly.

Pair Corralation between PT Astra and Aptiv PLC

Assuming the 90 days trading horizon PT Astra International is expected to generate 3.17 times more return on investment than Aptiv PLC. However, PT Astra is 3.17 times more volatile than Aptiv PLC. It trades about 0.05 of its potential returns per unit of risk. Aptiv PLC is currently generating about 0.14 per unit of risk. If you would invest  29.00  in PT Astra International on September 23, 2024 and sell it today you would earn a total of  1.00  from holding PT Astra International or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

PT Astra International  vs.  Aptiv PLC

PT Astra International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, PT Astra is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PT Astra and Aptiv PLC

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

The idea behind PT Astra International and Aptiv PLC 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.