Correlation Between PT Astra and Sandvik AB

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

Diversification Opportunities for PT Astra and Sandvik AB

0.09

Correlation Coefficient

PT Astra  Sandvik AB

Significant diversification

The 3 months correlation between PTAIF and Sandvik is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Sandvik AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB ADR 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB ADR has no effect on the direction of PT Astra i.e., PT Astra and Sandvik AB go up and down completely randomly.

Pair Corralation between PT Astra and Sandvik AB

Assuming the 90 days horizon PT Astra is expected to generate 26.1 times less return on investment than Sandvik AB. In addition to that, PT Astra is 2.19 times more volatile than Sandvik AB ADR. It trades about 0.0 of its total potential returns per unit of risk. Sandvik AB ADR is currently generating about 0.14 per unit of volatility. If you would invest  1,872  in Sandvik AB ADR on December 1, 2024 and sell it today you would earn a total of  285.00  from holding Sandvik AB ADR or generate 15.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.67%
Values	Daily Returns

PT Astra International  vs.  Sandvik AB ADR

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.

Sandvik AB ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Sandvik AB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Astra and Sandvik AB

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

The idea behind PT Astra International and Sandvik AB ADR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.