Correlation Between PT Astra and Rover

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

Diversification Opportunities for PT Astra and Rover

0.6

Correlation Coefficient

PT Astra  Rover

Poor diversification

The 3 months correlation between PTAIF and Rover is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Rover Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rover Group 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 Rover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rover Group has no effect on the direction of PT Astra i.e., PT Astra and Rover go up and down completely randomly.

Pair Corralation between PT Astra and Rover

Assuming the 90 days horizon PT Astra is expected to generate 1.31 times less return on investment than Rover. In addition to that, PT Astra is 2.23 times more volatile than Rover Group. It trades about 0.04 of its total potential returns per unit of risk. Rover Group is currently generating about 0.1 per unit of volatility. If you would invest  358.00  in Rover Group on September 19, 2024 and sell it today you would earn a total of  162.00  from holding Rover Group or generate 45.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	45.08%
Values	Daily Returns

PT Astra International  vs.  Rover Group

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.

Rover Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rover Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Rover is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PT Astra and Rover

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

The idea behind PT Astra International and Rover Group 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.