Correlation Between PT Astra and AAP

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

Diversification Opportunities for PT Astra and AAP

-0.01

Correlation Coefficient

PT Astra  AAP

Good diversification

The 3 months correlation between PTAIF and AAP is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc 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 AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of PT Astra i.e., PT Astra and AAP go up and down completely randomly.

Pair Corralation between PT Astra and AAP

Assuming the 90 days horizon PT Astra is expected to generate 50.52 times less return on investment than AAP. But when comparing it to its historical volatility, PT Astra International is 10.87 times less risky than AAP. It trades about 0.03 of its potential returns per unit of risk. AAP Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.02  in AAP Inc on December 26, 2024 and sell it today you would earn a total of  0.00  from holding AAP Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

PT Astra International  vs.  AAP Inc

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 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, PT Astra may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AAP Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AAP Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AAP revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Astra and AAP

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

The idea behind PT Astra International and AAP Inc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.