Correlation Between Gajah Tunggal and Citra Marga

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

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

Diversification Opportunities for Gajah Tunggal and Citra Marga

0.63

Correlation Coefficient

Gajah Tunggal  Citra Marga

Poor diversification

The 3 months correlation between Gajah and Citra is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gajah Tunggal Tbk and Citra Marga Nusaphala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citra Marga Nusaphala and Gajah Tunggal 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 Gajah Tunggal Tbk are associated (or correlated) with Citra Marga. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citra Marga Nusaphala has no effect on the direction of Gajah Tunggal i.e., Gajah Tunggal and Citra Marga go up and down completely randomly.

Pair Corralation between Gajah Tunggal and Citra Marga

Assuming the 90 days trading horizon Gajah Tunggal Tbk is expected to under-perform the Citra Marga. But the stock apears to be less risky and, when comparing its historical volatility, Gajah Tunggal Tbk is 4.11 times less risky than Citra Marga. The stock trades about -0.04 of its potential returns per unit of risk. The Citra Marga Nusaphala is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  143,000  in Citra Marga Nusaphala on December 30, 2024 and sell it today you would earn a total of  12,500  from holding Citra Marga Nusaphala or generate 8.74% return on investment over 90 days.

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

Gajah Tunggal Tbk  vs.  Citra Marga Nusaphala

Gajah Tunggal Tbk

Risk-Adjusted Performance

Very Weak

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

Citra Marga Nusaphala

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citra Marga Nusaphala are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Citra Marga disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gajah Tunggal and Citra Marga

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

The idea behind Gajah Tunggal Tbk and Citra Marga Nusaphala 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..