Correlation Between Garuda Metalindo and Equity Development

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

Diversification Opportunities for Garuda Metalindo and Equity Development

0.52

Correlation Coefficient

Garuda Metalindo  Equity Development

Very weak diversification

The 3 months correlation between Garuda and Equity is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Equity Development Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Development 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 Equity Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Development has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Equity Development go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Equity Development

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 0.5 times more return on investment than Equity Development. However, Garuda Metalindo Tbk is 1.99 times less risky than Equity Development. It trades about 0.19 of its potential returns per unit of risk. Equity Development Investment is currently generating about 0.08 per unit of risk. If you would invest  101,500  in Garuda Metalindo Tbk on September 4, 2024 and sell it today you would earn a total of  23,000  from holding Garuda Metalindo Tbk or generate 22.66% return on investment over 90 days.

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

Garuda Metalindo Tbk  vs.  Equity Development Investment

Garuda Metalindo Tbk

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 15 (%) 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.

Equity Development

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Development Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Equity Development disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Metalindo and Equity Development

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

The idea behind Garuda Metalindo Tbk and Equity Development Investment 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.