Correlation Between Graha Layar and Electronic City

Can any of the company-specific risk be diversified away by investing in both Graha Layar and Electronic 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 Electronic 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 Electronic City Indonesia, you can compare the effects of market volatilities on Graha Layar and Electronic 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 Electronic City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graha Layar and Electronic City.

Diversification Opportunities for Graha Layar and Electronic City

-0.13

Correlation Coefficient

Graha Layar  Electronic City

Good diversification

The 3 months correlation between Graha and Electronic is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Graha Layar Prima and Electronic City Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic City Indonesia 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 Electronic City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic City Indonesia has no effect on the direction of Graha Layar i.e., Graha Layar and Electronic City go up and down completely randomly.

Pair Corralation between Graha Layar and Electronic City

Assuming the 90 days trading horizon Graha Layar Prima is expected to under-perform the Electronic City. In addition to that, Graha Layar is 1.07 times more volatile than Electronic City Indonesia. It trades about -0.01 of its total potential returns per unit of risk. Electronic City Indonesia is currently generating about -0.01 per unit of volatility. If you would invest  51,853  in Electronic City Indonesia on September 13, 2024 and sell it today you would lose (21,053) from holding Electronic City Indonesia or give up 40.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Graha Layar Prima  vs.  Electronic City Indonesia

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.

Electronic City Indonesia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic City Indonesia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Electronic City disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graha Layar and Electronic City

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

The idea behind Graha Layar Prima and Electronic City Indonesia 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .