Correlation Between British Amer and PT Gudang

Can any of the company-specific risk be diversified away by investing in both British Amer and PT Gudang 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 British Amer and PT Gudang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between British American Tobacco and PT Gudang Garam, you can compare the effects of market volatilities on British Amer and PT Gudang 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 British Amer with a short position of PT Gudang. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and PT Gudang.

Diversification Opportunities for British Amer and PT Gudang

0.33

Correlation Coefficient

British Amer  PT Gudang

Weak diversification

The 3 months correlation between British and GGNPF is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and PT Gudang Garam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Gudang Garam and British Amer 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 British American Tobacco are associated (or correlated) with PT Gudang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Gudang Garam has no effect on the direction of British Amer i.e., British Amer and PT Gudang go up and down completely randomly.

Pair Corralation between British Amer and PT Gudang

Considering the 90-day investment horizon British American Tobacco is expected to generate 0.25 times more return on investment than PT Gudang. However, British American Tobacco is 3.95 times less risky than PT Gudang. It trades about 0.13 of its potential returns per unit of risk. PT Gudang Garam is currently generating about -0.13 per unit of risk. If you would invest  3,643  in British American Tobacco on December 26, 2024 and sell it today you would earn a total of  428.00  from holding British American Tobacco or generate 11.75% return on investment over 90 days.

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

British American Tobacco  vs.  PT Gudang Garam

British American Tobacco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PT Gudang Garam

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Gudang Garam has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with British Amer and PT Gudang

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

The idea behind British American Tobacco and PT Gudang Garam 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.