Correlation Between Garuda Metalindo and Bank Nationalnobu

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

Diversification Opportunities for Garuda Metalindo and Bank Nationalnobu

0.63

Correlation Coefficient

Garuda Metalindo  Bank Nationalnobu

Poor diversification

The 3 months correlation between Garuda and Bank is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Bank Nationalnobu Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Nationalnobu 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 Bank Nationalnobu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Nationalnobu Tbk has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Bank Nationalnobu go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Bank Nationalnobu

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 0.76 times more return on investment than Bank Nationalnobu. However, Garuda Metalindo Tbk is 1.31 times less risky than Bank Nationalnobu. It trades about 0.17 of its potential returns per unit of risk. Bank Nationalnobu Tbk is currently generating about 0.07 per unit of risk. If you would invest  102,000  in Garuda Metalindo Tbk on September 2, 2024 and sell it today you would earn a total of  20,000  from holding Garuda Metalindo Tbk or generate 19.61% 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.  Bank Nationalnobu Tbk

Garuda Metalindo Tbk

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 13 (%) 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.

Bank Nationalnobu Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Nationalnobu Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Nationalnobu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Garuda Metalindo and Bank Nationalnobu

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

The idea behind Garuda Metalindo Tbk and Bank Nationalnobu 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.