Correlation Between Astra International and Melcor Developments

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

Diversification Opportunities for Astra International and Melcor Developments

0.46

Correlation Coefficient

Astra International  Melcor Developments

Very weak diversification

The 3 months correlation between Astra and Melcor is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments 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 Melcor Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Developments has no effect on the direction of Astra International i.e., Astra International and Melcor Developments go up and down completely randomly.

Pair Corralation between Astra International and Melcor Developments

Assuming the 90 days horizon Astra International is expected to generate 12.58 times less return on investment than Melcor Developments. But when comparing it to its historical volatility, Astra International Tbk is 2.01 times less risky than Melcor Developments. It trades about 0.0 of its potential returns per unit of risk. Melcor Developments is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  871.00  in Melcor Developments on October 10, 2024 and sell it today you would earn a total of  20.00  from holding Melcor Developments or generate 2.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.27%
Values	Daily Returns

Astra International Tbk  vs.  Melcor Developments

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.

Melcor Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melcor Developments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Astra International and Melcor Developments

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

The idea behind Astra International Tbk and Melcor Developments 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.