Correlation Between Sampoerna Agro and Astra Agro

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

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

Diversification Opportunities for Sampoerna Agro and Astra Agro

0.6

Correlation Coefficient

Sampoerna Agro  Astra Agro

Poor diversification

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

Pair Corralation between Sampoerna Agro and Astra Agro

Assuming the 90 days trading horizon Sampoerna Agro Tbk is expected to generate 0.66 times more return on investment than Astra Agro. However, Sampoerna Agro Tbk is 1.52 times less risky than Astra Agro. It trades about 0.03 of its potential returns per unit of risk. Astra Agro Lestari is currently generating about -0.01 per unit of risk. If you would invest  202,000  in Sampoerna Agro Tbk on September 5, 2024 and sell it today you would earn a total of  3,000  from holding Sampoerna Agro Tbk or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Sampoerna Agro Tbk  vs.  Astra Agro Lestari

Sampoerna Agro Tbk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sampoerna Agro Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Sampoerna Agro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Astra Agro Lestari

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astra Agro Lestari has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Astra Agro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sampoerna Agro and Astra Agro

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

The idea behind Sampoerna Agro Tbk and Astra Agro Lestari 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.