Correlation Between PT Astra and Embotelladora Andina

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

Diversification Opportunities for PT Astra and Embotelladora Andina

0.16

Correlation Coefficient

PT Astra  Embotelladora Andina

Average diversification

The 3 months correlation between ASII and Embotelladora is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding PT Astra International and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina 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 Embotelladora Andina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embotelladora Andina has no effect on the direction of PT Astra i.e., PT Astra and Embotelladora Andina go up and down completely randomly.

Pair Corralation between PT Astra and Embotelladora Andina

Given the investment horizon of 90 days PT Astra International is expected to generate 10.89 times more return on investment than Embotelladora Andina. However, PT Astra is 10.89 times more volatile than Embotelladora Andina SA. It trades about 0.03 of its potential returns per unit of risk. Embotelladora Andina SA is currently generating about -0.04 per unit of risk. If you would invest  0.19  in PT Astra International on August 14, 2024 and sell it today you would lose (0.12) from holding PT Astra International or give up 63.16% of portfolio value over 90 days.

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

PT Astra International  vs.  Embotelladora Andina SA

PT Astra International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, PT Astra demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Embotelladora Andina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embotelladora Andina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Embotelladora Andina is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PT Astra and Embotelladora Andina

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

The idea behind PT Astra International and Embotelladora Andina 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.