Correlation Between PT Astra and China Galaxy

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

Diversification Opportunities for PT Astra and China Galaxy

0.03

Correlation Coefficient

PT Astra  China Galaxy

Significant diversification

The 3 months correlation between PTAIF and China is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and China Galaxy Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Galaxy Securities 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 China Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Galaxy Securities has no effect on the direction of PT Astra i.e., PT Astra and China Galaxy go up and down completely randomly.

Pair Corralation between PT Astra and China Galaxy

Assuming the 90 days horizon PT Astra International is expected to under-perform the China Galaxy. In addition to that, PT Astra is 1.54 times more volatile than China Galaxy Securities. It trades about -0.01 of its total potential returns per unit of risk. China Galaxy Securities is currently generating about 0.0 per unit of volatility. If you would invest  1,345  in China Galaxy Securities on January 25, 2024 and sell it today you would lose (110.00) from holding China Galaxy Securities or give up 8.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.26%
Values	Daily Returns

PT Astra International  vs.  China Galaxy Securities

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 unfluctuating 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.

China Galaxy Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PT Astra and China Galaxy

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

The idea behind PT Astra International and China Galaxy Securities 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.