Correlation Between Astra Agro and Pikko Land

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

Diversification Opportunities for Astra Agro and Pikko Land

-0.66

Correlation Coefficient

Astra Agro  Pikko Land

Excellent diversification

The 3 months correlation between Astra and Pikko is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Astra Agro Lestari and Pikko Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pikko Land Development 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 Pikko Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pikko Land Development has no effect on the direction of Astra Agro i.e., Astra Agro and Pikko Land go up and down completely randomly.

Pair Corralation between Astra Agro and Pikko Land

Assuming the 90 days trading horizon Astra Agro is expected to generate 65.47 times less return on investment than Pikko Land. But when comparing it to its historical volatility, Astra Agro Lestari is 3.15 times less risky than Pikko Land. It trades about 0.0 of its potential returns per unit of risk. Pikko Land Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,700  in Pikko Land Development on September 13, 2024 and sell it today you would earn a total of  300.00  from holding Pikko Land Development or generate 8.11% return on investment over 90 days.

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

Astra Agro Lestari  vs.  Pikko Land Development

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. Despite quite persistent forward-looking signals, Astra Agro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pikko Land Development

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pikko Land Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pikko Land disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astra Agro and Pikko Land

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

The idea behind Astra Agro Lestari and Pikko Land Development 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.