Correlation Between Garuda Metalindo and Eastparc Hotel

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

Diversification Opportunities for Garuda Metalindo and Eastparc Hotel

-0.14

Correlation Coefficient

Garuda Metalindo  Eastparc Hotel

Good diversification

The 3 months correlation between Garuda and Eastparc is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Eastparc Hotel Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastparc Hotel 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 Eastparc Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastparc Hotel Tbk has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Eastparc Hotel go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Eastparc Hotel

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 1.33 times more return on investment than Eastparc Hotel. However, Garuda Metalindo is 1.33 times more volatile than Eastparc Hotel Tbk. It trades about -0.05 of its potential returns per unit of risk. Eastparc Hotel Tbk is currently generating about -0.1 per unit of risk. If you would invest  130,000  in Garuda Metalindo Tbk on December 30, 2024 and sell it today you would lose (8,000) from holding Garuda Metalindo Tbk or give up 6.15% of portfolio value over 90 days.

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

Garuda Metalindo Tbk  vs.  Eastparc Hotel Tbk

Garuda Metalindo Tbk

Risk-Adjusted Performance

Very Weak

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

Eastparc Hotel Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastparc Hotel Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Garuda Metalindo and Eastparc Hotel

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

The idea behind Garuda Metalindo Tbk and Eastparc Hotel 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.