Correlation Between Astra International and Prestige Cars

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

Diversification Opportunities for Astra International and Prestige Cars

-0.51

Correlation Coefficient

Astra International  Prestige Cars

Excellent diversification

The 3 months correlation between Astra and Prestige is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and Prestige Cars International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Cars Intern 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 Prestige Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Cars Intern has no effect on the direction of Astra International i.e., Astra International and Prestige Cars go up and down completely randomly.

Pair Corralation between Astra International and Prestige Cars

Assuming the 90 days horizon Astra International is expected to generate 27.96 times less return on investment than Prestige Cars. But when comparing it to its historical volatility, Astra International Tbk is 7.83 times less risky than Prestige Cars. It trades about 0.02 of its potential returns per unit of risk. Prestige Cars International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Prestige Cars International on September 12, 2024 and sell it today you would earn a total of  0.10  from holding Prestige Cars International or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Astra International Tbk  vs.  Prestige Cars International

Astra International Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astra International Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Prestige Cars Intern

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Cars International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Prestige Cars exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astra International and Prestige Cars

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

The idea behind Astra International Tbk and Prestige Cars International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.