Correlation Between Garuda Metalindo and Mitra Energi

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

Diversification Opportunities for Garuda Metalindo and Mitra Energi

0.15

Correlation Coefficient

Garuda Metalindo  Mitra Energi

Average diversification

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

Pair Corralation between Garuda Metalindo and Mitra Energi

Assuming the 90 days trading horizon Garuda Metalindo is expected to generate 95.72 times less return on investment than Mitra Energi. But when comparing it to its historical volatility, Garuda Metalindo Tbk is 2.26 times less risky than Mitra Energi. It trades about 0.01 of its potential returns per unit of risk. Mitra Energi Persada is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  59,000  in Mitra Energi Persada on October 26, 2024 and sell it today you would earn a total of  14,000  from holding Mitra Energi Persada or generate 23.73% return on investment over 90 days.

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

Garuda Metalindo Tbk  vs.  Mitra Energi Persada

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.

Mitra Energi Persada

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Garuda Metalindo and Mitra Energi

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

The idea behind Garuda Metalindo Tbk and Mitra Energi Persada 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.