Correlation Between Astra Otoparts and Bank Cimb

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

By analyzing existing cross correlation between Astra Otoparts Tbk and Bank Cimb Niaga, you can compare the effects of market volatilities on Astra Otoparts and Bank Cimb 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 Otoparts with a short position of Bank Cimb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astra Otoparts and Bank Cimb.

Diversification Opportunities for Astra Otoparts and Bank Cimb

-0.19

Correlation Coefficient

Astra Otoparts  Bank Cimb

Good diversification

The 3 months correlation between Astra and Bank is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Astra Otoparts Tbk and Bank Cimb Niaga in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Cimb Niaga and Astra Otoparts 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 Otoparts Tbk are associated (or correlated) with Bank Cimb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Cimb Niaga has no effect on the direction of Astra Otoparts i.e., Astra Otoparts and Bank Cimb go up and down completely randomly.

Pair Corralation between Astra Otoparts and Bank Cimb

Assuming the 90 days trading horizon Astra Otoparts Tbk is expected to under-perform the Bank Cimb. In addition to that, Astra Otoparts is 1.78 times more volatile than Bank Cimb Niaga. It trades about -0.07 of its total potential returns per unit of risk. Bank Cimb Niaga is currently generating about -0.02 per unit of volatility. If you would invest  179,500  in Bank Cimb Niaga on September 14, 2024 and sell it today you would lose (1,000.00) from holding Bank Cimb Niaga or give up 0.56% of portfolio value over 90 days.

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

Astra Otoparts Tbk  vs.  Bank Cimb Niaga

Astra Otoparts Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Otoparts Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Astra Otoparts is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bank Cimb Niaga

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Cimb Niaga has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Astra Otoparts and Bank Cimb

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

The idea behind Astra Otoparts Tbk and Bank Cimb Niaga 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.