Correlation Between Garuda Metalindo and Metro Healthcare

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

Diversification Opportunities for Garuda Metalindo and Metro Healthcare

0.88

Correlation Coefficient

Garuda Metalindo  Metro Healthcare

Very poor diversification

The 3 months correlation between Garuda and Metro is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Metro Healthcare Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Healthcare Ind 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 Metro Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Healthcare Ind has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Metro Healthcare go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Metro Healthcare

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 0.55 times more return on investment than Metro Healthcare. However, Garuda Metalindo Tbk is 1.81 times less risky than Metro Healthcare. It trades about 0.02 of its potential returns per unit of risk. Metro Healthcare Indonesia is currently generating about 0.0 per unit of risk. If you would invest  128,000  in Garuda Metalindo Tbk on October 24, 2024 and sell it today you would earn a total of  500.00  from holding Garuda Metalindo Tbk or generate 0.39% return on investment over 90 days.

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

Garuda Metalindo Tbk  vs.  Metro Healthcare Indonesia

Garuda Metalindo Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Garuda Metalindo may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Metro Healthcare Ind

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Healthcare Indonesia are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Metro Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Metalindo and Metro Healthcare

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

The idea behind Garuda Metalindo Tbk and Metro Healthcare 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..