Correlation Between PT Astra and NetEase Inc

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

Diversification Opportunities for PT Astra and NetEase Inc

0.1

Correlation Coefficient

PT Astra  NetEase Inc

Average diversification

The 3 months correlation between PTAIF and NetEase Inc is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase Inc has no effect on the direction of PT Astra i.e., PT Astra and NetEase Inc go up and down completely randomly.

Pair Corralation between PT Astra and NetEase Inc

Assuming the 90 days horizon PT Astra International is expected to generate 0.44 times more return on investment than NetEase Inc. However, PT Astra International is 2.29 times less risky than NetEase Inc. It trades about 0.08 of its potential returns per unit of risk. NetEase is currently generating about 0.03 per unit of risk. If you would invest  27.00  in PT Astra International on December 25, 2024 and sell it today you would earn a total of  4.00  from holding PT Astra International or generate 14.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

PT Astra International  vs.  NetEase

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 6 (%) 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.

NetEase Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NetEase Inc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Astra and NetEase Inc

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

The idea behind PT Astra International and NetEase 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.