Correlation Between Bank Negara and Astra Graphia

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

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

Diversification Opportunities for Bank Negara and Astra Graphia

-0.29

Correlation Coefficient

Bank Negara  Astra Graphia

Very good diversification

The 3 months correlation between Bank and Astra is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Astra Graphia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Graphia Tbk and Bank Negara 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 Bank Negara Indonesia are associated (or correlated) with Astra Graphia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Graphia Tbk has no effect on the direction of Bank Negara i.e., Bank Negara and Astra Graphia go up and down completely randomly.

Pair Corralation between Bank Negara and Astra Graphia

Assuming the 90 days trading horizon Bank Negara Indonesia is expected to under-perform the Astra Graphia. In addition to that, Bank Negara is 1.72 times more volatile than Astra Graphia Tbk. It trades about -0.07 of its total potential returns per unit of risk. Astra Graphia Tbk is currently generating about 0.12 per unit of volatility. If you would invest  80,698  in Astra Graphia Tbk on September 12, 2024 and sell it today you would earn a total of  6,302  from holding Astra Graphia Tbk or generate 7.81% return on investment over 90 days.

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

Bank Negara Indonesia  vs.  Astra Graphia Tbk

Bank Negara Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Negara Indonesia 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.

Astra Graphia Tbk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Graphia Tbk are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Astra Graphia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank Negara and Astra Graphia

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

The idea behind Bank Negara Indonesia and Astra Graphia 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 Stocks Directory module to find actively traded stocks across global markets.