Correlation Between PT Astra and Petra Diamonds

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

Diversification Opportunities for PT Astra and Petra Diamonds

-0.18

Correlation Coefficient

PT Astra  Petra Diamonds

Good diversification

The 3 months correlation between PTAIF and Petra is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Petra Diamonds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petra Diamonds 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 Petra Diamonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petra Diamonds has no effect on the direction of PT Astra i.e., PT Astra and Petra Diamonds go up and down completely randomly.

Pair Corralation between PT Astra and Petra Diamonds

Assuming the 90 days horizon PT Astra International is expected to generate 4.12 times more return on investment than Petra Diamonds. However, PT Astra is 4.12 times more volatile than Petra Diamonds Limited. It trades about -0.01 of its potential returns per unit of risk. Petra Diamonds Limited is currently generating about -0.21 per unit of risk. If you would invest  30.00  in PT Astra International on December 5, 2024 and sell it today you would lose (1.00) from holding PT Astra International or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

PT Astra International  vs.  Petra Diamonds Limited

PT Astra International

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Astra International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, PT Astra is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Petra Diamonds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petra Diamonds Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PT Astra and Petra Diamonds

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

The idea behind PT Astra International and Petra Diamonds Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.