Correlation Between Astra International and SM Investments

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

Diversification Opportunities for Astra International and SM Investments

-0.23

Correlation Coefficient

Astra International  SM Investments

Very good diversification

The 3 months correlation between Astra and SVTMF is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments 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 SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Astra International i.e., Astra International and SM Investments go up and down completely randomly.

Pair Corralation between Astra International and SM Investments

Assuming the 90 days horizon Astra International Tbk is expected to under-perform the SM Investments. In addition to that, Astra International is 1.14 times more volatile than SM Investments. It trades about -0.03 of its total potential returns per unit of risk. SM Investments is currently generating about 0.12 per unit of volatility. If you would invest  1,420  in SM Investments on October 7, 2024 and sell it today you would earn a total of  220.00  from holding SM Investments or generate 15.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Astra International Tbk  vs.  SM Investments

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.

SM Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, SM Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astra International and SM Investments

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

The idea behind Astra International Tbk and SM Investments 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.