Correlation Between Astra International and Fairfax India

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

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

Diversification Opportunities for Astra International and Fairfax India

-0.45

Correlation Coefficient

Astra International  Fairfax India

Very good diversification

The 3 months correlation between Astra and Fairfax is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Astra International Tbk and Fairfax India Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax India Holdings and Astra International 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 Astra International Tbk are associated (or correlated) with Fairfax India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax India Holdings has no effect on the direction of Astra International i.e., Astra International and Fairfax India go up and down completely randomly.

Pair Corralation between Astra International and Fairfax India

Assuming the 90 days horizon Astra International Tbk is expected to under-perform the Fairfax India. In addition to that, Astra International is 1.66 times more volatile than Fairfax India Holdings. It trades about -0.01 of its total potential returns per unit of risk. Fairfax India Holdings is currently generating about 0.12 per unit of volatility. If you would invest  1,455  in Fairfax India Holdings on September 5, 2024 and sell it today you would earn a total of  136.00  from holding Fairfax India Holdings or generate 9.35% return on investment over 90 days.

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

Astra International Tbk  vs.  Fairfax India Holdings

Astra International Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astra International Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Astra International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Fairfax India Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fairfax India Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Fairfax India may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Astra International and Fairfax India

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

The idea behind Astra International Tbk and Fairfax India Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.