Correlation Between Bayu Buana and Garuda Metalindo

Can any of the company-specific risk be diversified away by investing in both Bayu Buana and Garuda Metalindo 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 Bayu Buana and Garuda Metalindo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bayu Buana Tbk and Garuda Metalindo Tbk, you can compare the effects of market volatilities on Bayu Buana and Garuda Metalindo 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 Bayu Buana with a short position of Garuda Metalindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayu Buana and Garuda Metalindo.

Diversification Opportunities for Bayu Buana and Garuda Metalindo

0.05

Correlation Coefficient

Bayu Buana  Garuda Metalindo

Significant diversification

The 3 months correlation between Bayu and Garuda is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bayu Buana Tbk and Garuda Metalindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Metalindo Tbk and Bayu Buana 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 Bayu Buana Tbk are associated (or correlated) with Garuda Metalindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Metalindo Tbk has no effect on the direction of Bayu Buana i.e., Bayu Buana and Garuda Metalindo go up and down completely randomly.

Pair Corralation between Bayu Buana and Garuda Metalindo

Assuming the 90 days trading horizon Bayu Buana Tbk is expected to under-perform the Garuda Metalindo. But the stock apears to be less risky and, when comparing its historical volatility, Bayu Buana Tbk is 1.01 times less risky than Garuda Metalindo. The stock trades about -0.15 of its potential returns per unit of risk. The Garuda Metalindo Tbk is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  130,000  in Garuda Metalindo Tbk on December 29, 2024 and sell it today you would lose (8,000) from holding Garuda Metalindo Tbk or give up 6.15% of portfolio value over 90 days.

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

Bayu Buana Tbk  vs.  Garuda Metalindo Tbk

Bayu Buana Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bayu Buana 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.

Garuda Metalindo Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garuda Metalindo Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Garuda Metalindo is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bayu Buana and Garuda Metalindo

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

The idea behind Bayu Buana Tbk and Garuda Metalindo 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.