Correlation Between Astra Agro and Australian Agricultural

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

By analyzing existing cross correlation between Astra Agro Lestari and Australian Agricultural, you can compare the effects of market volatilities on Astra Agro and Australian Agricultural 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 Agro with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra Agro and Australian Agricultural.

Diversification Opportunities for Astra Agro and Australian Agricultural

0.24

Correlation Coefficient

Astra Agro  Australian Agricultural

Modest diversification

The 3 months correlation between Astra and Australian is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Astra Agro Lestari and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Astra Agro 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 Agro Lestari are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Astra Agro i.e., Astra Agro and Australian Agricultural go up and down completely randomly.

Pair Corralation between Astra Agro and Australian Agricultural

If you would invest  91.00  in Australian Agricultural on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Australian Agricultural or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	39.06%
Values	Daily Returns

Astra Agro Lestari  vs.  Australian Agricultural

Astra Agro Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

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

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Australian Agricultural is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Astra Agro and Australian Agricultural

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

The idea behind Astra Agro Lestari and Australian Agricultural 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.