Correlation Between PT Astra and Magna International

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

Diversification Opportunities for PT Astra and Magna International

0.64

Correlation Coefficient

PT Astra  Magna International

Poor diversification

The 3 months correlation between ASJA and Magna is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of PT Astra i.e., PT Astra and Magna International go up and down completely randomly.

Pair Corralation between PT Astra and Magna International

Assuming the 90 days trading horizon PT Astra International is expected to generate 2.66 times more return on investment than Magna International. However, PT Astra is 2.66 times more volatile than Magna International. It trades about 0.01 of its potential returns per unit of risk. Magna International is currently generating about -0.1 per unit of risk. If you would invest  28.00  in PT Astra International on December 28, 2024 and sell it today you would lose (2.00) from holding PT Astra International or give up 7.14% of portfolio value over 90 days.

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

PT Astra International  vs.  Magna International

PT Astra International

Risk-Adjusted Performance

Weak

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

Magna International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Astra and Magna International

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

The idea behind PT Astra International and Magna International 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.