Correlation Between Astra International and PT Bank

Can any of the company-specific risk be diversified away by investing in both Astra International and PT Bank 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 Astra International and PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Astra International Tbk and PT Bank Rakyat, you can compare the effects of market volatilities on Astra International and PT Bank 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 Astra International with a short position of PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra International and PT Bank.

Diversification Opportunities for Astra International and PT Bank

0.67

Correlation Coefficient

Astra International  PT Bank

Poor diversification

The 3 months correlation between Astra and BKRKF is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat and Astra International 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 Astra International Tbk are associated (or correlated) with PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Astra International i.e., Astra International and PT Bank go up and down completely randomly.

Pair Corralation between Astra International and PT Bank

Assuming the 90 days horizon Astra International is expected to generate 8.0 times less return on investment than PT Bank. But when comparing it to its historical volatility, Astra International Tbk is 6.46 times less risky than PT Bank. It trades about 0.1 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  21.00  in PT Bank Rakyat on October 20, 2024 and sell it today you would earn a total of  3.00  from holding PT Bank Rakyat or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Astra International Tbk  vs.  PT Bank Rakyat

Astra International Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Astra International and PT Bank

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

The idea behind Astra International Tbk and PT Bank Rakyat 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.