Correlation Between Garuda Metalindo and Arkadia Digital

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

Diversification Opportunities for Garuda Metalindo and Arkadia Digital

0.62

Correlation Coefficient

Garuda Metalindo  Arkadia Digital

Poor diversification

The 3 months correlation between Garuda and Arkadia is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Arkadia Digital Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkadia Digital Media 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 Arkadia Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkadia Digital Media has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Arkadia Digital go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Arkadia Digital

Assuming the 90 days trading horizon Garuda Metalindo is expected to generate 12.23 times less return on investment than Arkadia Digital. But when comparing it to its historical volatility, Garuda Metalindo Tbk is 2.64 times less risky than Arkadia Digital. It trades about 0.02 of its potential returns per unit of risk. Arkadia Digital Media is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,600  in Arkadia Digital Media on October 24, 2024 and sell it today you would earn a total of  100.00  from holding Arkadia Digital Media or generate 6.25% return on investment over 90 days.

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

Garuda Metalindo Tbk  vs.  Arkadia Digital Media

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.

Arkadia Digital Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arkadia Digital Media are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Arkadia Digital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Metalindo and Arkadia Digital

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

The idea behind Garuda Metalindo Tbk and Arkadia Digital Media 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.