Correlation Between Bank Cimb and Garda Tujuh

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

By analyzing existing cross correlation between Bank Cimb Niaga and Garda Tujuh Buana, you can compare the effects of market volatilities on Bank Cimb and Garda Tujuh 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 Bank Cimb with a short position of Garda Tujuh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Cimb and Garda Tujuh.

Diversification Opportunities for Bank Cimb and Garda Tujuh

0.72

Correlation Coefficient

Bank Cimb  Garda Tujuh

Poor diversification

The 3 months correlation between Bank and Garda is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank Cimb Niaga and Garda Tujuh Buana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garda Tujuh Buana and Bank Cimb 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 Bank Cimb Niaga are associated (or correlated) with Garda Tujuh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garda Tujuh Buana has no effect on the direction of Bank Cimb i.e., Bank Cimb and Garda Tujuh go up and down completely randomly.

Pair Corralation between Bank Cimb and Garda Tujuh

Assuming the 90 days trading horizon Bank Cimb Niaga is expected to generate 0.39 times more return on investment than Garda Tujuh. However, Bank Cimb Niaga is 2.55 times less risky than Garda Tujuh. It trades about -0.02 of its potential returns per unit of risk. Garda Tujuh Buana is currently generating about -0.28 per unit of risk. If you would invest  173,000  in Bank Cimb Niaga on December 29, 2024 and sell it today you would lose (3,500) from holding Bank Cimb Niaga or give up 2.02% of portfolio value over 90 days.

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

Bank Cimb Niaga  vs.  Garda Tujuh Buana

Bank Cimb Niaga

Risk-Adjusted Performance

Very Weak

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

Garda Tujuh Buana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garda Tujuh Buana 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 Bank Cimb and Garda Tujuh

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

The idea behind Bank Cimb Niaga and Garda Tujuh Buana 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.