Correlation Between PT Astra and Union Electric

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

Diversification Opportunities for PT Astra and Union Electric

-0.5

Correlation Coefficient

PT Astra  Union Electric

Very good diversification

The 3 months correlation between PTAIF and Union is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of PT Astra i.e., PT Astra and Union Electric go up and down completely randomly.

Pair Corralation between PT Astra and Union Electric

Assuming the 90 days horizon PT Astra is expected to generate 1.15 times less return on investment than Union Electric. In addition to that, PT Astra is 1.13 times more volatile than Union Electric. It trades about 0.05 of its total potential returns per unit of risk. Union Electric is currently generating about 0.07 per unit of volatility. If you would invest  8,385  in Union Electric on September 12, 2024 and sell it today you would earn a total of  2,615  from holding Union Electric or generate 31.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.1%
Values	Daily Returns

PT Astra International  vs.  Union Electric

PT Astra International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 12 (%) 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.

Union Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Union Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Astra and Union Electric

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

The idea behind PT Astra International and Union Electric 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.