Correlation Between Gudang Garam and Sona Topas

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

Diversification Opportunities for Gudang Garam and Sona Topas

-0.86

Correlation Coefficient

Gudang Garam  Sona Topas

Pay attention - limited upside

The 3 months correlation between Gudang and Sona is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Sona Topas Tourism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sona Topas Tourism 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 Sona Topas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sona Topas Tourism has no effect on the direction of Gudang Garam i.e., Gudang Garam and Sona Topas go up and down completely randomly.

Pair Corralation between Gudang Garam and Sona Topas

Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the Sona Topas. But the stock apears to be less risky and, when comparing its historical volatility, Gudang Garam Tbk is 6.75 times less risky than Sona Topas. The stock trades about -0.13 of its potential returns per unit of risk. The Sona Topas Tourism is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  132,500  in Sona Topas Tourism on September 12, 2024 and sell it today you would earn a total of  545,000  from holding Sona Topas Tourism or generate 411.32% return on investment over 90 days.

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

Gudang Garam Tbk  vs.  Sona Topas Tourism

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.

Sona Topas Tourism

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sona Topas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gudang Garam and Sona Topas

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

The idea behind Gudang Garam Tbk and Sona Topas Tourism 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.