Correlation Between PT Astra and Holiday Island

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

Diversification Opportunities for PT Astra and Holiday Island

-0.69

Correlation Coefficient

PT Astra  Holiday Island

Excellent diversification

The 3 months correlation between PTAIF and Holiday is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Holiday Island Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Island Holdings 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 Holiday Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Island Holdings has no effect on the direction of PT Astra i.e., PT Astra and Holiday Island go up and down completely randomly.

Pair Corralation between PT Astra and Holiday Island

Assuming the 90 days horizon PT Astra is expected to generate 2.09 times less return on investment than Holiday Island. But when comparing it to its historical volatility, PT Astra International is 7.84 times less risky than Holiday Island. It trades about 0.21 of its potential returns per unit of risk. Holiday Island Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Holiday Island Holdings on September 3, 2024 and sell it today you would lose (0.50) from holding Holiday Island Holdings or give up 14.29% of portfolio value over 90 days.

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

PT Astra International  vs.  Holiday Island Holdings

PT Astra International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 16 (%) 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.

Holiday Island Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holiday Island Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Holiday Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Astra and Holiday Island

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

The idea behind PT Astra International and Holiday Island Holdings 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.