Correlation Between GUDANG GARAM and Monument Mining

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

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

Diversification Opportunities for GUDANG GARAM and Monument Mining

-0.53

Correlation Coefficient

GUDANG GARAM  Monument Mining

Excellent diversification

The 3 months correlation between GUDANG and Monument is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding GUDANG GARAM and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining 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 Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of GUDANG GARAM i.e., GUDANG GARAM and Monument Mining go up and down completely randomly.

Pair Corralation between GUDANG GARAM and Monument Mining

Assuming the 90 days trading horizon GUDANG GARAM is expected to under-perform the Monument Mining. But the stock apears to be less risky and, when comparing its historical volatility, GUDANG GARAM is 1.87 times less risky than Monument Mining. The stock trades about -0.21 of its potential returns per unit of risk. The Monument Mining Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Monument Mining Limited on December 23, 2024 and sell it today you would earn a total of  8.00  from holding Monument Mining Limited or generate 42.11% return on investment over 90 days.

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

GUDANG GARAM  vs.  Monument Mining Limited

GUDANG GARAM

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Monument Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monument Mining Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Monument Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUDANG GARAM and Monument Mining

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

The idea behind GUDANG GARAM and Monument Mining 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.