Correlation Between Astra International and Cisco Systems

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

Diversification Opportunities for Astra International and Cisco Systems

-0.6

Correlation Coefficient

Astra International  Cisco Systems

Excellent diversification

The 3 months correlation between Astra and Cisco is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Astra International i.e., Astra International and Cisco Systems go up and down completely randomly.

Pair Corralation between Astra International and Cisco Systems

Assuming the 90 days horizon Astra International is expected to generate 4.89 times less return on investment than Cisco Systems. In addition to that, Astra International is 1.4 times more volatile than Cisco Systems. It trades about 0.01 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.05 per unit of volatility. If you would invest  4,412  in Cisco Systems on October 9, 2024 and sell it today you would earn a total of  1,465  from holding Cisco Systems or generate 33.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Astra International Tbk  vs.  Cisco Systems

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Cisco Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Astra International and Cisco Systems

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

The idea behind Astra International Tbk and Cisco Systems 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.