Correlation Between Vale Indonesia and Astra Agro
Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Astra Agro 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 Vale Indonesia and Astra Agro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale Indonesia Tbk and Astra Agro Lestari, you can compare the effects of market volatilities on Vale Indonesia and Astra Agro 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 Vale Indonesia with a short position of Astra Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Astra Agro.
Diversification Opportunities for Vale Indonesia and Astra Agro
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vale and Astra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Astra Agro Lestari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Agro Lestari and Vale Indonesia 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 Vale Indonesia Tbk are associated (or correlated) with Astra Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Agro Lestari has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Astra Agro go up and down completely randomly.
Pair Corralation between Vale Indonesia and Astra Agro
Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Astra Agro. In addition to that, Vale Indonesia is 3.08 times more volatile than Astra Agro Lestari. It trades about -0.31 of its total potential returns per unit of risk. Astra Agro Lestari is currently generating about -0.24 per unit of volatility. If you would invest 615,000 in Astra Agro Lestari on November 3, 2024 and sell it today you would lose (25,000) from holding Astra Agro Lestari or give up 4.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale Indonesia Tbk vs. Astra Agro Lestari
Performance |
| Timeline |
| Vale Indonesia Tbk |
| Astra Agro Lestari |
Vale Indonesia and Astra Agro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale Indonesia and Astra Agro
The main advantage of trading using opposite Vale Indonesia and Astra Agro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale Indonesia position performs unexpectedly, Astra Agro 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 Astra Agro will offset losses from the drop in Astra Agro's long position.| Vale Indonesia vs. Timah Persero Tbk | Vale Indonesia vs. Aneka Tambang Persero | Vale Indonesia vs. Bukit Asam Tbk | Vale Indonesia vs. Perusahaan Gas Negara |
| Astra Agro vs. Perusahaan Perkebunan London | Astra Agro vs. United Tractors Tbk | Astra Agro vs. Vale Indonesia Tbk | Astra Agro vs. Astra International Tbk |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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