Correlation Between PT Gajah and Motorcar Parts

Can any of the company-specific risk be diversified away by investing in both PT Gajah and Motorcar Parts 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 PT Gajah and Motorcar Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Gajah Tunggal and Motorcar Parts of, you can compare the effects of market volatilities on PT Gajah and Motorcar Parts 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 PT Gajah with a short position of Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Gajah and Motorcar Parts.

Diversification Opportunities for PT Gajah and Motorcar Parts

-0.46

Correlation Coefficient

PT Gajah  Motorcar Parts

Very good diversification

The 3 months correlation between GH8 and Motorcar is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding PT Gajah Tunggal and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts and PT Gajah 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 PT Gajah Tunggal are associated (or correlated) with Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of PT Gajah i.e., PT Gajah and Motorcar Parts go up and down completely randomly.

Pair Corralation between PT Gajah and Motorcar Parts

Assuming the 90 days horizon PT Gajah is expected to generate 1.19 times less return on investment than Motorcar Parts. In addition to that, PT Gajah is 2.25 times more volatile than Motorcar Parts of. It trades about 0.03 of its total potential returns per unit of risk. Motorcar Parts of is currently generating about 0.09 per unit of volatility. If you would invest  560.00  in Motorcar Parts of on September 30, 2024 and sell it today you would earn a total of  220.00  from holding Motorcar Parts of or generate 39.29% return on investment over 90 days.

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

PT Gajah Tunggal  vs.  Motorcar Parts of

PT Gajah Tunggal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Gajah Tunggal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Gajah is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Motorcar Parts

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with PT Gajah and Motorcar Parts

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

The idea behind PT Gajah Tunggal and Motorcar Parts of 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.