Correlation Between Galva Technologies and Indonesian Tobacco

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

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

Diversification Opportunities for Galva Technologies and Indonesian Tobacco

0.41

Correlation Coefficient

Galva Technologies  Indonesian Tobacco

Very weak diversification

The 3 months correlation between Galva and Indonesian is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Galva Technologies Tbk and Indonesian Tobacco Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Tobacco Tbk and Galva Technologies 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 Galva Technologies Tbk are associated (or correlated) with Indonesian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Tobacco Tbk has no effect on the direction of Galva Technologies i.e., Galva Technologies and Indonesian Tobacco go up and down completely randomly.

Pair Corralation between Galva Technologies and Indonesian Tobacco

Assuming the 90 days trading horizon Galva Technologies Tbk is expected to generate 0.69 times more return on investment than Indonesian Tobacco. However, Galva Technologies Tbk is 1.45 times less risky than Indonesian Tobacco. It trades about 0.0 of its potential returns per unit of risk. Indonesian Tobacco Tbk is currently generating about -0.01 per unit of risk. If you would invest  34,400  in Galva Technologies Tbk on September 16, 2024 and sell it today you would lose (200.00) from holding Galva Technologies Tbk or give up 0.58% of portfolio value over 90 days.

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

Galva Technologies Tbk  vs.  Indonesian Tobacco Tbk

Galva Technologies Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Indonesian Tobacco Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indonesian Tobacco Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Indonesian Tobacco 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 Galva Technologies and Indonesian Tobacco

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

The idea behind Galva Technologies Tbk and Indonesian Tobacco 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.

Check out your portfolio center.

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.