Correlation Between Gudang Garam and Modernland Realty

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

Diversification Opportunities for Gudang Garam and Modernland Realty

0.35

Correlation Coefficient

Gudang Garam  Modernland Realty

Weak diversification

The 3 months correlation between Gudang and Modernland is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Modernland Realty Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modernland Realty 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 Modernland Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modernland Realty has no effect on the direction of Gudang Garam i.e., Gudang Garam and Modernland Realty go up and down completely randomly.

Pair Corralation between Gudang Garam and Modernland Realty

Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the Modernland Realty. But the stock apears to be less risky and, when comparing its historical volatility, Gudang Garam Tbk is 1.01 times less risky than Modernland Realty. The stock trades about -0.15 of its potential returns per unit of risk. The Modernland Realty Ltd is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,200  in Modernland Realty Ltd on November 29, 2024 and sell it today you would lose (200.00) from holding Modernland Realty Ltd or give up 3.85% of portfolio value over 90 days.

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

Gudang Garam Tbk  vs.  Modernland Realty Ltd

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

Modernland Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Modernland Realty Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Modernland Realty 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 Modernland Realty

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

The idea behind Gudang Garam Tbk and Modernland Realty Ltd 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.