Correlation Between Gudang Garam and Delta Djakarta

Can any of the company-specific risk be diversified away by investing in both Gudang Garam and Delta Djakarta 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 Delta Djakarta 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 Delta Djakarta Tbk, you can compare the effects of market volatilities on Gudang Garam and Delta Djakarta 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 Delta Djakarta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gudang Garam and Delta Djakarta.

Diversification Opportunities for Gudang Garam and Delta Djakarta

0.61

Correlation Coefficient

Gudang Garam  Delta Djakarta

Poor diversification

The 3 months correlation between Gudang and Delta is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Delta Djakarta Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Djakarta Tbk 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 Delta Djakarta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Djakarta Tbk has no effect on the direction of Gudang Garam i.e., Gudang Garam and Delta Djakarta go up and down completely randomly.

Pair Corralation between Gudang Garam and Delta Djakarta

Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the Delta Djakarta. In addition to that, Gudang Garam is 1.49 times more volatile than Delta Djakarta Tbk. It trades about -0.2 of its total potential returns per unit of risk. Delta Djakarta Tbk is currently generating about -0.04 per unit of volatility. If you would invest  215,000  in Delta Djakarta Tbk on December 30, 2024 and sell it today you would lose (9,000) from holding Delta Djakarta Tbk or give up 4.19% 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.  Delta Djakarta Tbk

Gudang Garam Tbk

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Delta Djakarta Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Djakarta Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delta Djakarta is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gudang Garam and Delta Djakarta

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

The idea behind Gudang Garam Tbk and Delta Djakarta Tbk 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.