Correlation Between PT Astra and Mountain Valley

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

Diversification Opportunities for PT Astra and Mountain Valley

-0.55

Correlation Coefficient

PT Astra  Mountain Valley

Excellent diversification

The 3 months correlation between PTAIF and Mountain is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Mountain Valley MD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Valley MD 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 Mountain Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Valley MD has no effect on the direction of PT Astra i.e., PT Astra and Mountain Valley go up and down completely randomly.

Pair Corralation between PT Astra and Mountain Valley

Assuming the 90 days horizon PT Astra International is expected to generate 0.29 times more return on investment than Mountain Valley. However, PT Astra International is 3.45 times less risky than Mountain Valley. It trades about -0.02 of its potential returns per unit of risk. Mountain Valley MD is currently generating about -0.06 per unit of risk. If you would invest  32.00  in PT Astra International on September 21, 2024 and sell it today you would lose (2.00) from holding PT Astra International or give up 6.25% of portfolio value over 90 days.

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

PT Astra International  vs.  Mountain Valley MD

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 indicators, PT Astra is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mountain Valley MD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mountain Valley MD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Astra and Mountain Valley

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

The idea behind PT Astra International and Mountain Valley MD 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.