Correlation Between PT Astra and Compagnie Generale

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

Diversification Opportunities for PT Astra and Compagnie Generale

-0.77

Correlation Coefficient

PT Astra  Compagnie Generale

Pay attention - limited upside

The 3 months correlation between PTAIF and Compagnie is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Compagnie Generale des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Generale des 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 Compagnie Generale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Generale des has no effect on the direction of PT Astra i.e., PT Astra and Compagnie Generale go up and down completely randomly.

Pair Corralation between PT Astra and Compagnie Generale

Assuming the 90 days horizon PT Astra International is expected to generate 1.06 times more return on investment than Compagnie Generale. However, PT Astra is 1.06 times more volatile than Compagnie Generale des. It trades about 0.16 of its potential returns per unit of risk. Compagnie Generale des is currently generating about -0.21 per unit of risk. If you would invest  32.00  in PT Astra International on September 4, 2024 and sell it today you would earn a total of  5.00  from holding PT Astra International or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

PT Astra International  vs.  Compagnie Generale des

PT Astra International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, PT Astra reported solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Generale des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Generale des has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PT Astra and Compagnie Generale

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

The idea behind PT Astra International and Compagnie Generale des 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.