Correlation Between PT Astra and SANUWAVE Health

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

Diversification Opportunities for PT Astra and SANUWAVE Health

0.84

Correlation Coefficient

PT Astra  SANUWAVE Health

Very poor diversification

The 3 months correlation between PTAIF and SANUWAVE is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health 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 SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of PT Astra i.e., PT Astra and SANUWAVE Health go up and down completely randomly.

Pair Corralation between PT Astra and SANUWAVE Health

Assuming the 90 days horizon PT Astra is expected to generate 5.95 times less return on investment than SANUWAVE Health. But when comparing it to its historical volatility, PT Astra International is 4.1 times less risky than SANUWAVE Health. It trades about 0.21 of its potential returns per unit of risk. SANUWAVE Health is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  559.00  in SANUWAVE Health on September 3, 2024 and sell it today you would earn a total of  1,541  from holding SANUWAVE Health or generate 275.67% return on investment over 90 days.

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

PT Astra International  vs.  SANUWAVE Health

PT Astra International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 16 (%) 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.

SANUWAVE Health

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Astra and SANUWAVE Health

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

The idea behind PT Astra International and SANUWAVE Health 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.