Correlation Between Astra Agro and Semen Indonesia

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

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

Diversification Opportunities for Astra Agro and Semen Indonesia

0.69

Correlation Coefficient

Astra Agro  Semen Indonesia

Poor diversification

The 3 months correlation between Astra and Semen is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Astra Agro Lestari and Semen Indonesia Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semen Indonesia Persero and Astra 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 Astra Agro Lestari are associated (or correlated) with Semen Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semen Indonesia Persero has no effect on the direction of Astra Agro i.e., Astra Agro and Semen Indonesia go up and down completely randomly.

Pair Corralation between Astra Agro and Semen Indonesia

Assuming the 90 days trading horizon Astra Agro Lestari is expected to generate 0.54 times more return on investment than Semen Indonesia. However, Astra Agro Lestari is 1.84 times less risky than Semen Indonesia. It trades about -0.42 of its potential returns per unit of risk. Semen Indonesia Persero is currently generating about -0.65 per unit of risk. If you would invest  677,152  in Astra Agro Lestari on February 4, 2024 and sell it today you would lose (47,152) from holding Astra Agro Lestari or give up 6.96% of portfolio value over 90 days.

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

Astra Agro Lestari  vs.  Semen Indonesia Persero

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Astra Agro and Semen Indonesia

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

The idea behind Astra Agro Lestari and Semen Indonesia Persero 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.