Correlation Between Garuda Construction and EIH Associated

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

Diversification Opportunities for Garuda Construction and EIH Associated

0.43

Correlation Coefficient

Garuda Construction  EIH Associated

Very weak diversification

The 3 months correlation between Garuda and EIH is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels 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 EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of Garuda Construction i.e., Garuda Construction and EIH Associated go up and down completely randomly.

Pair Corralation between Garuda Construction and EIH Associated

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 1.53 times more return on investment than EIH Associated. However, Garuda Construction is 1.53 times more volatile than EIH Associated Hotels. It trades about 0.33 of its potential returns per unit of risk. EIH Associated Hotels is currently generating about 0.14 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Garuda Construction Engineerin  vs.  EIH Associated Hotels

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 fragile basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

EIH Associated Hotels

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, EIH Associated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Garuda Construction and EIH Associated

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

The idea behind Garuda Construction Engineering and EIH Associated Hotels 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.