Correlation Between PT Astra and Orient Overseas

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

By analyzing existing cross correlation between PT Astra International and Orient Overseas Limited, you can compare the effects of market volatilities on PT Astra and Orient Overseas 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 PT Astra with a short position of Orient Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Astra and Orient Overseas.

Diversification Opportunities for PT Astra and Orient Overseas

-0.34

Correlation Coefficient

PT Astra  Orient Overseas

Very good diversification

The 3 months correlation between ASJA and Orient is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Orient Overseas Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Overseas and PT Astra 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 PT Astra International are associated (or correlated) with Orient Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Overseas has no effect on the direction of PT Astra i.e., PT Astra and Orient Overseas go up and down completely randomly.

Pair Corralation between PT Astra and Orient Overseas

Assuming the 90 days trading horizon PT Astra is expected to generate 1.28 times less return on investment than Orient Overseas. In addition to that, PT Astra is 1.87 times more volatile than Orient Overseas Limited. It trades about 0.01 of its total potential returns per unit of risk. Orient Overseas Limited is currently generating about 0.02 per unit of volatility. If you would invest  1,212  in Orient Overseas Limited on September 22, 2024 and sell it today you would earn a total of  24.00  from holding Orient Overseas Limited or generate 1.98% return on investment over 90 days.

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

PT Astra International  vs.  Orient Overseas Limited

PT Astra International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Astra International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, PT Astra is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Orient Overseas

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Overseas Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Orient Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Astra and Orient Overseas

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

The idea behind PT Astra International and Orient Overseas Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.