Correlation Between Gudang Garam and Argha Karya

Can any of the company-specific risk be diversified away by investing in both Gudang Garam and Argha Karya 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 Argha Karya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gudang Garam Tbk and Argha Karya Prima, you can compare the effects of market volatilities on Gudang Garam and Argha Karya 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 Argha Karya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gudang Garam and Argha Karya.

Diversification Opportunities for Gudang Garam and Argha Karya

0.66

Correlation Coefficient

Gudang Garam  Argha Karya

Poor diversification

The 3 months correlation between Gudang and Argha is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Argha Karya Prima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argha Karya Prima 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 Tbk are associated (or correlated) with Argha Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argha Karya Prima has no effect on the direction of Gudang Garam i.e., Gudang Garam and Argha Karya go up and down completely randomly.

Pair Corralation between Gudang Garam and Argha Karya

Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the Argha Karya. But the stock apears to be less risky and, when comparing its historical volatility, Gudang Garam Tbk is 2.48 times less risky than Argha Karya. The stock trades about -0.14 of its potential returns per unit of risk. The Argha Karya Prima is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  68,000  in Argha Karya Prima on September 13, 2024 and sell it today you would lose (8,000) from holding Argha Karya Prima or give up 11.76% of portfolio value over 90 days.

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

Gudang Garam Tbk  vs.  Argha Karya Prima

Gudang Garam Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gudang Garam Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Argha Karya Prima

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argha Karya Prima has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Gudang Garam and Argha Karya

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

The idea behind Gudang Garam Tbk and Argha Karya Prima 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.