Correlation Between PT Astra and Premier Foods

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

Diversification Opportunities for PT Astra and Premier Foods

0.34

Correlation Coefficient

PT Astra  Premier Foods

Weak diversification

The 3 months correlation between PTAIF and Premier is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Premier Foods Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods Plc 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods Plc has no effect on the direction of PT Astra i.e., PT Astra and Premier Foods go up and down completely randomly.

Pair Corralation between PT Astra and Premier Foods

Assuming the 90 days horizon PT Astra International is expected to generate 6.91 times more return on investment than Premier Foods. However, PT Astra is 6.91 times more volatile than Premier Foods Plc. It trades about -0.01 of its potential returns per unit of risk. Premier Foods Plc is currently generating about -0.12 per unit of risk. If you would invest  30.00  in PT Astra International on November 29, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PT Astra International  vs.  Premier Foods Plc

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.

Premier Foods Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Foods Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PT Astra and Premier Foods

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

The idea behind PT Astra International and Premier Foods Plc 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.