Correlation Between Garuda Metalindo and IDX 30

Can any of the company-specific risk be diversified away by investing in both Garuda Metalindo and IDX 30 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 IDX 30 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 IDX 30 Jakarta, you can compare the effects of market volatilities on Garuda Metalindo and IDX 30 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 IDX 30. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Metalindo and IDX 30.

Diversification Opportunities for Garuda Metalindo and IDX 30

-0.15

Correlation Coefficient

Garuda Metalindo  IDX 30

Good diversification

The 3 months correlation between Garuda and IDX is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and IDX 30 Jakarta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDX 30 Jakarta 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 IDX 30. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDX 30 Jakarta has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and IDX 30 go up and down completely randomly.

Pair Corralation between Garuda Metalindo and IDX 30

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 0.97 times more return on investment than IDX 30. However, Garuda Metalindo Tbk is 1.03 times less risky than IDX 30. It trades about -0.05 of its potential returns per unit of risk. IDX 30 Jakarta is currently generating about -0.08 per unit of risk. If you would invest  130,000  in Garuda Metalindo Tbk on December 28, 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.  IDX 30 Jakarta

Pair Trading with Garuda Metalindo and IDX 30

The main advantage of trading using opposite Garuda Metalindo and IDX 30 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garuda Metalindo position performs unexpectedly, IDX 30 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 IDX 30 will offset losses from the drop in IDX 30's long position.

The idea behind Garuda Metalindo Tbk and IDX 30 Jakarta 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.