Correlation Between Bigbloc Construction and Garuda Construction

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

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

Diversification Opportunities for Bigbloc Construction and Garuda Construction

0.58

Correlation Coefficient

Bigbloc Construction  Garuda Construction

Very weak diversification

The 3 months correlation between Bigbloc and Garuda is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bigbloc Construction Limited and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction and Bigbloc Construction 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 Bigbloc Construction Limited are associated (or correlated) with Garuda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Construction has no effect on the direction of Bigbloc Construction i.e., Bigbloc Construction and Garuda Construction go up and down completely randomly.

Pair Corralation between Bigbloc Construction and Garuda Construction

Assuming the 90 days trading horizon Bigbloc Construction Limited is expected to generate 0.79 times more return on investment than Garuda Construction. However, Bigbloc Construction Limited is 1.26 times less risky than Garuda Construction. It trades about -0.04 of its potential returns per unit of risk. Garuda Construction Engineering is currently generating about -0.06 per unit of risk. If you would invest  12,584  in Bigbloc Construction Limited on September 4, 2024 and sell it today you would lose (1,503) from holding Bigbloc Construction Limited or give up 11.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	55.56%
Values	Daily Returns

Bigbloc Construction Limited  vs.  Garuda Construction Engineerin

Bigbloc Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bigbloc Construction Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bigbloc Construction and Garuda Construction

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

The idea behind Bigbloc Construction Limited and Garuda Construction Engineering 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.