Correlation Between Garuda Construction and General Insurance

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

Diversification Opportunities for Garuda Construction and General Insurance

0.5

Correlation Coefficient

Garuda Construction  General Insurance

Very weak diversification

The 3 months correlation between Garuda and General is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance 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 General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Garuda Construction i.e., Garuda Construction and General Insurance go up and down completely randomly.

Pair Corralation between Garuda Construction and General Insurance

Assuming the 90 days trading horizon Garuda Construction is expected to generate 1.34 times less return on investment than General Insurance. In addition to that, Garuda Construction is 1.46 times more volatile than General Insurance. It trades about 0.05 of its total potential returns per unit of risk. General Insurance is currently generating about 0.09 per unit of volatility. If you would invest  15,501  in General Insurance on September 27, 2024 and sell it today you would earn a total of  31,389  from holding General Insurance or generate 202.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	10.92%
Values	Daily Returns

Garuda Construction Engineerin  vs.  General Insurance

Garuda Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

General Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Construction and General Insurance

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

The idea behind Garuda Construction Engineering and General Insurance 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.