Correlation Between Astra Otoparts and Gajah Tunggal

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

Diversification Opportunities for Astra Otoparts and Gajah Tunggal

0.03

Correlation Coefficient

Astra Otoparts  Gajah Tunggal

Significant diversification

The 3 months correlation between Astra and Gajah is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Astra Otoparts Tbk and Gajah Tunggal Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gajah Tunggal Tbk 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 Gajah Tunggal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gajah Tunggal Tbk has no effect on the direction of Astra Otoparts i.e., Astra Otoparts and Gajah Tunggal go up and down completely randomly.

Pair Corralation between Astra Otoparts and Gajah Tunggal

Assuming the 90 days trading horizon Astra Otoparts Tbk is expected to under-perform the Gajah Tunggal. But the stock apears to be less risky and, when comparing its historical volatility, Astra Otoparts Tbk is 1.44 times less risky than Gajah Tunggal. The stock trades about 0.0 of its potential returns per unit of risk. The Gajah Tunggal Tbk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  83,375  in Gajah Tunggal Tbk on September 14, 2024 and sell it today you would earn a total of  29,625  from holding Gajah Tunggal Tbk or generate 35.53% return on investment over 90 days.

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

Astra Otoparts Tbk  vs.  Gajah Tunggal Tbk

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.

Gajah Tunggal Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gajah Tunggal Tbk 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 Gajah Tunggal

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

The idea behind Astra Otoparts Tbk and Gajah Tunggal Tbk 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.