Correlation Between Austindo Nusantara and Gudang Garam

Can any of the company-specific risk be diversified away by investing in both Austindo Nusantara and Gudang Garam 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 Austindo Nusantara and Gudang Garam into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austindo Nusantara Jaya and Gudang Garam Tbk, you can compare the effects of market volatilities on Austindo Nusantara and Gudang Garam 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 Austindo Nusantara with a short position of Gudang Garam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austindo Nusantara and Gudang Garam.

Diversification Opportunities for Austindo Nusantara and Gudang Garam

-0.6

Correlation Coefficient

Austindo Nusantara  Gudang Garam

Excellent diversification

The 3 months correlation between Austindo and Gudang is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Austindo Nusantara Jaya and Gudang Garam Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gudang Garam Tbk and Austindo Nusantara 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 Austindo Nusantara Jaya are associated (or correlated) with Gudang Garam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gudang Garam Tbk has no effect on the direction of Austindo Nusantara i.e., Austindo Nusantara and Gudang Garam go up and down completely randomly.

Pair Corralation between Austindo Nusantara and Gudang Garam

Assuming the 90 days trading horizon Austindo Nusantara Jaya is expected to generate 1.95 times more return on investment than Gudang Garam. However, Austindo Nusantara is 1.95 times more volatile than Gudang Garam Tbk. It trades about 0.35 of its potential returns per unit of risk. Gudang Garam Tbk is currently generating about -0.2 per unit of risk. If you would invest  71,500  in Austindo Nusantara Jaya on December 29, 2024 and sell it today you would earn a total of  88,500  from holding Austindo Nusantara Jaya or generate 123.78% return on investment over 90 days.

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

Austindo Nusantara Jaya  vs.  Gudang Garam Tbk

Austindo Nusantara Jaya

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gudang Garam Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gudang Garam Tbk 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 forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Austindo Nusantara and Gudang Garam

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

The idea behind Austindo Nusantara Jaya and Gudang Garam Tbk 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.