Correlation Between Garuda Construction and Indo Borax

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

Diversification Opportunities for Garuda Construction and Indo Borax

0.45

Correlation Coefficient

Garuda Construction  Indo Borax

Very weak diversification

The 3 months correlation between Garuda and Indo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and Indo Borax Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Borax Chemicals 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 Indo Borax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Borax Chemicals has no effect on the direction of Garuda Construction i.e., Garuda Construction and Indo Borax go up and down completely randomly.

Pair Corralation between Garuda Construction and Indo Borax

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 1.85 times more return on investment than Indo Borax. However, Garuda Construction is 1.85 times more volatile than Indo Borax Chemicals. It trades about 0.14 of its potential returns per unit of risk. Indo Borax Chemicals is currently generating about 0.23 per unit of risk. If you would invest  8,254  in Garuda Construction Engineering on September 19, 2024 and sell it today you would earn a total of  1,231  from holding Garuda Construction Engineering or generate 14.91% 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.  Indo Borax Chemicals

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Garuda Construction and Indo Borax

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

The idea behind Garuda Construction Engineering and Indo Borax Chemicals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.