Correlation Between PT Astra and NorAm Drilling

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

Diversification Opportunities for PT Astra and NorAm Drilling

0.24

Correlation Coefficient

PT Astra  NorAm Drilling

Modest diversification

The 3 months correlation between ASJA and NorAm is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of PT Astra i.e., PT Astra and NorAm Drilling go up and down completely randomly.

Pair Corralation between PT Astra and NorAm Drilling

Assuming the 90 days trading horizon PT Astra International is expected to under-perform the NorAm Drilling. In addition to that, PT Astra is 1.14 times more volatile than NorAm Drilling AS. It trades about -0.02 of its total potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.0 per unit of volatility. If you would invest  281.00  in NorAm Drilling AS on December 28, 2024 and sell it today you would lose (9.00) from holding NorAm Drilling AS or give up 3.2% of portfolio value over 90 days.

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

PT Astra International  vs.  NorAm Drilling AS

PT Astra International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, PT Astra may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NorAm Drilling AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NorAm Drilling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PT Astra and NorAm Drilling

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

The idea behind PT Astra International and NorAm Drilling AS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.