Correlation Between Garuda Metalindo and Weha Transportasi

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

Diversification Opportunities for Garuda Metalindo and Weha Transportasi

-0.85

Correlation Coefficient

Garuda Metalindo  Weha Transportasi

Pay attention - limited upside

The 3 months correlation between Garuda and Weha is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Weha Transportasi Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weha Transportasi 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 Weha Transportasi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weha Transportasi has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Weha Transportasi go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Weha Transportasi

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 1.0 times more return on investment than Weha Transportasi. However, Garuda Metalindo Tbk is 1.0 times less risky than Weha Transportasi. It trades about 0.08 of its potential returns per unit of risk. Weha Transportasi Indonesia is currently generating about -0.27 per unit of risk. If you would invest  124,500  in Garuda Metalindo Tbk on December 1, 2024 and sell it today you would earn a total of  8,000  from holding Garuda Metalindo Tbk or generate 6.43% return on investment over 90 days.

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

Garuda Metalindo Tbk  vs.  Weha Transportasi Indonesia

Garuda Metalindo Tbk

Risk-Adjusted Performance

Modest

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

Weha Transportasi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Weha Transportasi Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Garuda Metalindo and Weha Transportasi

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

The idea behind Garuda Metalindo Tbk and Weha Transportasi Indonesia 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.