Correlation Between PT Astra and LAir Liquide

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

Diversification Opportunities for PT Astra and LAir Liquide

-0.79

Correlation Coefficient

PT Astra  LAir Liquide

Pay attention - limited upside

The 3 months correlation between PTAIF and LAir is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and LAir Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAir Liquide SA 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 LAir Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAir Liquide SA has no effect on the direction of PT Astra i.e., PT Astra and LAir Liquide go up and down completely randomly.

Pair Corralation between PT Astra and LAir Liquide

Assuming the 90 days horizon PT Astra International is expected to generate 0.59 times more return on investment than LAir Liquide. However, PT Astra International is 1.7 times less risky than LAir Liquide. It trades about -0.21 of its potential returns per unit of risk. LAir Liquide SA is currently generating about -0.23 per unit of risk. If you would invest  33.00  in PT Astra International on February 1, 2024 and sell it today you would lose (1.00) from holding PT Astra International or give up 3.03% of portfolio value over 90 days.

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

PT Astra International  vs.  LAir Liquide SA

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 latest weak performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

LAir Liquide SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LAir Liquide SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LAir Liquide is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Astra and LAir Liquide

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

The idea behind PT Astra International and LAir Liquide SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.