Correlation Between Garuda Metalindo and Cipta Selera

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

Diversification Opportunities for Garuda Metalindo and Cipta Selera

0.4

Correlation Coefficient

Garuda Metalindo  Cipta Selera

Very weak diversification

The 3 months correlation between Garuda and Cipta is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Cipta Selera Murni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cipta Selera Murni 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 Cipta Selera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cipta Selera Murni has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Cipta Selera go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Cipta Selera

Assuming the 90 days trading horizon Garuda Metalindo is expected to generate 1.79 times less return on investment than Cipta Selera. In addition to that, Garuda Metalindo is 1.27 times more volatile than Cipta Selera Murni. It trades about 0.1 of its total potential returns per unit of risk. Cipta Selera Murni is currently generating about 0.24 per unit of volatility. If you would invest  278,000  in Cipta Selera Murni on October 26, 2024 and sell it today you would earn a total of  61,000  from holding Cipta Selera Murni or generate 21.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.92%
Values	Daily Returns

Garuda Metalindo Tbk  vs.  Cipta Selera Murni

Garuda Metalindo Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 8 (%) 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.

Cipta Selera Murni

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cipta Selera Murni are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cipta Selera disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Metalindo and Cipta Selera

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

The idea behind Garuda Metalindo Tbk and Cipta Selera Murni 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 Commodity Directory module to find actively traded commodities issued by global exchanges.