Correlation Between Bank Negara and Astra International

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

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

Diversification Opportunities for Bank Negara and Astra International

0.45

Correlation Coefficient

Bank Negara  Astra International

Very weak diversification

The 3 months correlation between Bank and Astra is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Astra International Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra International Tbk and Bank Negara 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 Bank Negara Indonesia are associated (or correlated) with Astra International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra International Tbk has no effect on the direction of Bank Negara i.e., Bank Negara and Astra International go up and down completely randomly.

Pair Corralation between Bank Negara and Astra International

Assuming the 90 days trading horizon Bank Negara is expected to generate 2.04 times less return on investment than Astra International. In addition to that, Bank Negara is 1.86 times more volatile than Astra International Tbk. It trades about 0.0 of its total potential returns per unit of risk. Astra International Tbk is currently generating about 0.01 per unit of volatility. If you would invest  490,000  in Astra International Tbk on December 30, 2024 and sell it today you would earn a total of  2,000  from holding Astra International Tbk or generate 0.41% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Astra International Tbk

Bank Negara Indonesia

Risk-Adjusted Performance

Very Weak

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

Astra International Tbk

Risk-Adjusted Performance

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.

Pair Trading with Bank Negara and Astra International

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

The idea behind Bank Negara Indonesia and Astra International 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.