Correlation Between PT Astra and Focus Graphite

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

Diversification Opportunities for PT Astra and Focus Graphite

0.21

Correlation Coefficient

PT Astra  Focus Graphite

Modest diversification

The 3 months correlation between PTAIF and Focus is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite 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 Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of PT Astra i.e., PT Astra and Focus Graphite go up and down completely randomly.

Pair Corralation between PT Astra and Focus Graphite

Assuming the 90 days horizon PT Astra is expected to generate 3.22 times less return on investment than Focus Graphite. But when comparing it to its historical volatility, PT Astra International is 2.54 times less risky than Focus Graphite. It trades about 0.03 of its potential returns per unit of risk. Focus Graphite is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Focus Graphite on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Focus Graphite or generate 0.0% return on investment over 90 days.

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

PT Astra International  vs.  Focus Graphite

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 weak forward indicators, PT Astra may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Focus Graphite

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Graphite are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Focus Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Astra and Focus Graphite

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

The idea behind PT Astra International and Focus Graphite 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.