Correlation Between Sumitomo Mitsui and PT Astra

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

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

Diversification Opportunities for Sumitomo Mitsui and PT Astra

-0.66

Correlation Coefficient

Sumitomo Mitsui  PT Astra

Excellent diversification

The 3 months correlation between Sumitomo and PTAIF is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial 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 Sumitomo Mitsui 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 Sumitomo Mitsui Financial 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 Sumitomo Mitsui i.e., Sumitomo Mitsui and PT Astra go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and PT Astra

Assuming the 90 days horizon Sumitomo Mitsui Financial is expected to generate 3.57 times more return on investment than PT Astra. However, Sumitomo Mitsui is 3.57 times more volatile than PT Astra International. It trades about 0.0 of its potential returns per unit of risk. PT Astra International is currently generating about -0.22 per unit of risk. If you would invest  5,757  in Sumitomo Mitsui Financial on February 5, 2024 and sell it today you would lose (23.00) from holding Sumitomo Mitsui Financial or give up 0.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Sumitomo Mitsui Financial  vs.  PT Astra International

Sumitomo Mitsui Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Sumitomo Mitsui reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sumitomo Mitsui and PT Astra

The main advantage of trading using opposite Sumitomo Mitsui and PT Astra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui 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 Sumitomo Mitsui Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.