Correlation Between GUDANG GARAM and AXA SA

Can any of the company-specific risk be diversified away by investing in both GUDANG GARAM and AXA SA 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 GUDANG GARAM and AXA SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GUDANG GARAM and AXA SA, you can compare the effects of market volatilities on GUDANG GARAM and AXA SA 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 GUDANG GARAM with a short position of AXA SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUDANG GARAM and AXA SA.

Diversification Opportunities for GUDANG GARAM and AXA SA

0.73

Correlation Coefficient

GUDANG GARAM  AXA SA

Poor diversification

The 3 months correlation between GUDANG and AXA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding GUDANG GARAM and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA and GUDANG GARAM 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 GUDANG GARAM are associated (or correlated) with AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of GUDANG GARAM i.e., GUDANG GARAM and AXA SA go up and down completely randomly.

Pair Corralation between GUDANG GARAM and AXA SA

Assuming the 90 days trading horizon GUDANG GARAM is expected to generate 2.75 times less return on investment than AXA SA. In addition to that, GUDANG GARAM is 2.73 times more volatile than AXA SA. It trades about 0.04 of its total potential returns per unit of risk. AXA SA is currently generating about 0.31 per unit of volatility. If you would invest  3,279  in AXA SA on October 5, 2024 and sell it today you would earn a total of  164.00  from holding AXA SA or generate 5.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

GUDANG GARAM  vs.  AXA SA

GUDANG GARAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUDANG GARAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

AXA SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GUDANG GARAM and AXA SA

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

The idea behind GUDANG GARAM and AXA SA 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.