Correlation Between Garuda Construction and Golden Tobacco

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

Diversification Opportunities for Garuda Construction and Golden Tobacco

0.18

Correlation Coefficient

Garuda Construction  Golden Tobacco

Average diversification

The 3 months correlation between Garuda and Golden is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco 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 Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of Garuda Construction i.e., Garuda Construction and Golden Tobacco go up and down completely randomly.

Pair Corralation between Garuda Construction and Golden Tobacco

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 1.52 times more return on investment than Golden Tobacco. However, Garuda Construction is 1.52 times more volatile than Golden Tobacco Limited. It trades about 0.4 of its potential returns per unit of risk. Golden Tobacco Limited is currently generating about -0.06 per unit of risk. If you would invest  10,085  in Garuda Construction Engineering on October 11, 2024 and sell it today you would earn a total of  4,605  from holding Garuda Construction Engineering or generate 45.66% return on investment over 90 days.

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

Garuda Construction Engineerin  vs.  Golden Tobacco Limited

Garuda Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 10 (%) 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.

Golden Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Garuda Construction and Golden Tobacco

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

The idea behind Garuda Construction Engineering and Golden Tobacco Limited 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.