Correlation Between PT Astra and Intact Financial

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

Diversification Opportunities for PT Astra and Intact Financial

0.77

Correlation Coefficient

PT Astra  Intact Financial

Poor diversification

The 3 months correlation between PTAIF and Intact is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Intact Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intact Financial 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 Intact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intact Financial has no effect on the direction of PT Astra i.e., PT Astra and Intact Financial go up and down completely randomly.

Pair Corralation between PT Astra and Intact Financial

Assuming the 90 days horizon PT Astra International is expected to generate 1.91 times more return on investment than Intact Financial. However, PT Astra is 1.91 times more volatile than Intact Financial. It trades about 0.21 of its potential returns per unit of risk. Intact Financial is currently generating about 0.07 per unit of risk. If you would invest  29.00  in PT Astra International on September 3, 2024 and sell it today you would earn a total of  8.00  from holding PT Astra International or generate 27.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

PT Astra International  vs.  Intact Financial

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.

Intact Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Intact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Astra and Intact Financial

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

The idea behind PT Astra International and Intact Financial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.