Correlation Between Graha Layar and Natura City

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

By analyzing existing cross correlation between Graha Layar Prima and Natura City Developments, you can compare the effects of market volatilities on Graha Layar and Natura City 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 Graha Layar with a short position of Natura City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graha Layar and Natura City.

Diversification Opportunities for Graha Layar and Natura City

0.56

Correlation Coefficient

Graha Layar  Natura City

Very weak diversification

The 3 months correlation between Graha and Natura is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Graha Layar Prima and Natura City Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura City Developments and Graha Layar 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 Graha Layar Prima are associated (or correlated) with Natura City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura City Developments has no effect on the direction of Graha Layar i.e., Graha Layar and Natura City go up and down completely randomly.

Pair Corralation between Graha Layar and Natura City

Assuming the 90 days trading horizon Graha Layar is expected to generate 16.63 times less return on investment than Natura City. But when comparing it to its historical volatility, Graha Layar Prima is 7.27 times less risky than Natura City. It trades about 0.05 of its potential returns per unit of risk. Natura City Developments is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,000  in Natura City Developments on September 13, 2024 and sell it today you would earn a total of  5,000  from holding Natura City Developments or generate 62.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Graha Layar Prima  vs.  Natura City Developments

Graha Layar Prima

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Graha Layar Prima are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Graha Layar is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Natura City Developments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natura City Developments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Natura City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graha Layar and Natura City

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

The idea behind Graha Layar Prima and Natura City Developments 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.