Correlation Between Garuda Metalindo and Bayu Buana

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

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

Diversification Opportunities for Garuda Metalindo and Bayu Buana

-0.31

Correlation Coefficient

Garuda Metalindo  Bayu Buana

Very good diversification

The 3 months correlation between Garuda and Bayu is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Bayu Buana Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayu Buana Tbk and Garuda Metalindo 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 Garuda Metalindo Tbk are associated (or correlated) with Bayu Buana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayu Buana Tbk has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Bayu Buana go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Bayu Buana

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 1.48 times more return on investment than Bayu Buana. However, Garuda Metalindo is 1.48 times more volatile than Bayu Buana Tbk. It trades about 0.21 of its potential returns per unit of risk. Bayu Buana Tbk is currently generating about 0.02 per unit of risk. If you would invest  104,000  in Garuda Metalindo Tbk on September 14, 2024 and sell it today you would earn a total of  26,000  from holding Garuda Metalindo Tbk or generate 25.0% return on investment over 90 days.

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

Garuda Metalindo Tbk  vs.  Bayu Buana Tbk

Garuda Metalindo Tbk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Garuda Metalindo disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bayu Buana Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bayu Buana Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bayu Buana 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 Garuda Metalindo and Bayu Buana

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

The idea behind Garuda Metalindo Tbk and Bayu Buana 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.