Correlation Between GUDANG GARAM and Costco Wholesale

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

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

Diversification Opportunities for GUDANG GARAM and Costco Wholesale

-0.8

Correlation Coefficient

GUDANG GARAM  Costco Wholesale

Pay attention - limited upside

The 3 months correlation between GUDANG and Costco is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding GUDANG GARAM and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of GUDANG GARAM i.e., GUDANG GARAM and Costco Wholesale go up and down completely randomly.

Pair Corralation between GUDANG GARAM and Costco Wholesale

Assuming the 90 days trading horizon GUDANG GARAM is expected to under-perform the Costco Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, GUDANG GARAM is 1.12 times less risky than Costco Wholesale. The stock trades about -0.24 of its potential returns per unit of risk. The Costco Wholesale is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  78,896  in Costco Wholesale on September 4, 2024 and sell it today you would earn a total of  14,634  from holding Costco Wholesale or generate 18.55% return on investment over 90 days.

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

GUDANG GARAM  vs.  Costco Wholesale

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Costco Wholesale

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Costco Wholesale reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUDANG GARAM and Costco Wholesale

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

The idea behind GUDANG GARAM and Costco Wholesale 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.