Correlation Between Garuda Indonesia and Fortune Indonesia

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

By analyzing existing cross correlation between Garuda Indonesia Persero and Fortune Indonesia Tbk, you can compare the effects of market volatilities on Garuda Indonesia and Fortune Indonesia 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 Garuda Indonesia with a short position of Fortune Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Indonesia and Fortune Indonesia.

Diversification Opportunities for Garuda Indonesia and Fortune Indonesia

-0.59

Correlation Coefficient

Garuda Indonesia  Fortune Indonesia

Excellent diversification

The 3 months correlation between Garuda and Fortune is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Indonesia Persero and Fortune Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Indonesia Tbk and Garuda Indonesia 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 Garuda Indonesia Persero are associated (or correlated) with Fortune Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Indonesia Tbk has no effect on the direction of Garuda Indonesia i.e., Garuda Indonesia and Fortune Indonesia go up and down completely randomly.

Pair Corralation between Garuda Indonesia and Fortune Indonesia

Assuming the 90 days trading horizon Garuda Indonesia Persero is expected to under-perform the Fortune Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Garuda Indonesia Persero is 1.83 times less risky than Fortune Indonesia. The stock trades about -0.06 of its potential returns per unit of risk. The Fortune Indonesia Tbk is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  22,400  in Fortune Indonesia Tbk on September 4, 2024 and sell it today you would earn a total of  439,600  from holding Fortune Indonesia Tbk or generate 1962.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Garuda Indonesia Persero  vs.  Fortune Indonesia Tbk

Garuda Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fortune Indonesia Tbk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Indonesia Tbk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Fortune Indonesia disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Indonesia and Fortune Indonesia

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

The idea behind Garuda Indonesia Persero and Fortune Indonesia 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.