Correlation Between Bridgestone Corp and PT Astra

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

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

Diversification Opportunities for Bridgestone Corp and PT Astra

0.2

Correlation Coefficient

Bridgestone Corp  PT Astra

Modest diversification

The 3 months correlation between Bridgestone and PTAIF is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone Corp ADR and PT Astra International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Astra International and Bridgestone Corp 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 Bridgestone Corp ADR are associated (or correlated) with PT Astra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Astra International has no effect on the direction of Bridgestone Corp i.e., Bridgestone Corp and PT Astra go up and down completely randomly.

Pair Corralation between Bridgestone Corp and PT Astra

Assuming the 90 days horizon Bridgestone Corp ADR is expected to generate 0.24 times more return on investment than PT Astra. However, Bridgestone Corp ADR is 4.1 times less risky than PT Astra. It trades about -0.19 of its potential returns per unit of risk. PT Astra International is currently generating about -0.15 per unit of risk. If you would invest  2,227  in Bridgestone Corp ADR on March 12, 2024 and sell it today you would lose (119.00) from holding Bridgestone Corp ADR or give up 5.34% of portfolio value over 90 days.

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

Bridgestone Corp ADR  vs.  PT Astra International

Bridgestone Corp ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgestone Corp ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Bridgestone Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bridgestone Corp and PT Astra

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

The idea behind Bridgestone Corp ADR and PT Astra International 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.