Correlation Between PT Astra and First Northern

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

Diversification Opportunities for PT Astra and First Northern

-0.78

Correlation Coefficient

PT Astra  First Northern

Pay attention - limited upside

The 3 months correlation between PTAIF and First is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and First Northern Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northern Community 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 First Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northern Community has no effect on the direction of PT Astra i.e., PT Astra and First Northern go up and down completely randomly.

Pair Corralation between PT Astra and First Northern

Assuming the 90 days horizon PT Astra International is expected to generate 2.23 times more return on investment than First Northern. However, PT Astra is 2.23 times more volatile than First Northern Community. It trades about 0.16 of its potential returns per unit of risk. First Northern Community is currently generating about -0.11 per unit of risk. If you would invest  32.00  in PT Astra International on September 12, 2024 and sell it today you would earn a total of  5.00  from holding PT Astra International or generate 15.63% return on investment over 90 days.

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

PT Astra International  vs.  First Northern Community

PT Astra International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, PT Astra reported solid returns over the last few months and may actually be approaching a breakup point.

First Northern Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Northern Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First Northern is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PT Astra and First Northern

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

The idea behind PT Astra International and First Northern Community 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.