Correlation Between Garuda Construction and Agro Tech

Can any of the company-specific risk be diversified away by investing in both Garuda Construction and Agro Tech 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 Construction and Agro Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garuda Construction Engineering and Agro Tech Foods, you can compare the effects of market volatilities on Garuda Construction and Agro Tech 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 Construction with a short position of Agro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Construction and Agro Tech.

Diversification Opportunities for Garuda Construction and Agro Tech

-0.44

Correlation Coefficient

Garuda Construction  Agro Tech

Very good diversification

The 3 months correlation between Garuda and Agro is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and Agro Tech Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Tech Foods and Garuda Construction 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 Construction Engineering are associated (or correlated) with Agro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Tech Foods has no effect on the direction of Garuda Construction i.e., Garuda Construction and Agro Tech go up and down completely randomly.

Pair Corralation between Garuda Construction and Agro Tech

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 2.45 times more return on investment than Agro Tech. However, Garuda Construction is 2.45 times more volatile than Agro Tech Foods. It trades about 0.33 of its potential returns per unit of risk. Agro Tech Foods is currently generating about -0.01 per unit of risk. If you would invest  10,383  in Garuda Construction Engineering on October 8, 2024 and sell it today you would earn a total of  2,994  from holding Garuda Construction Engineering or generate 28.84% return on investment over 90 days.

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

Garuda Construction Engineerin  vs.  Agro Tech Foods

Garuda Construction

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Agro Tech Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agro Tech Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Agro Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Construction and Agro Tech

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

The idea behind Garuda Construction Engineering and Agro Tech Foods 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.