Correlation Between Sims Metal and PT Astra

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

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

Diversification Opportunities for Sims Metal and PT Astra

0.09

Correlation Coefficient

Sims Metal  PT Astra

Significant diversification

The 3 months correlation between Sims and ASJA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sims Metal Management 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 Sims Metal 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 Sims Metal Management 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 Sims Metal i.e., Sims Metal and PT Astra go up and down completely randomly.

Pair Corralation between Sims Metal and PT Astra

Assuming the 90 days horizon Sims Metal Management is expected to generate 0.2 times more return on investment than PT Astra. However, Sims Metal Management is 4.97 times less risky than PT Astra. It trades about 0.18 of its potential returns per unit of risk. PT Astra International is currently generating about 0.03 per unit of risk. If you would invest  785.00  in Sims Metal Management on April 24, 2025 and sell it today you would earn a total of  120.00  from holding Sims Metal Management or generate 15.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sims Metal Management  vs.  PT Astra International

Sims Metal Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sims Metal Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sims Metal reported solid returns over the last few months and may actually be approaching a breakup point.

PT Astra International

Risk-Adjusted Performance

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 nearly fragile forward-looking indicators, PT Astra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sims Metal and PT Astra

The main advantage of trading using opposite Sims Metal and PT Astra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sims Metal 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 Sims Metal Management 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.