Correlation Between Garudafood Putra and FAP Agri

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

By analyzing existing cross correlation between Garudafood Putra Putri and FAP Agri Tbk, you can compare the effects of market volatilities on Garudafood Putra and FAP Agri 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 Garudafood Putra with a short position of FAP Agri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garudafood Putra and FAP Agri.

Diversification Opportunities for Garudafood Putra and FAP Agri

-0.17

Correlation Coefficient

Garudafood Putra  FAP Agri

Good diversification

The 3 months correlation between Garudafood and FAP is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Garudafood Putra Putri and FAP Agri Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAP Agri Tbk and Garudafood Putra 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 Garudafood Putra Putri are associated (or correlated) with FAP Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAP Agri Tbk has no effect on the direction of Garudafood Putra i.e., Garudafood Putra and FAP Agri go up and down completely randomly.

Pair Corralation between Garudafood Putra and FAP Agri

Assuming the 90 days trading horizon Garudafood Putra Putri is expected to under-perform the FAP Agri. In addition to that, Garudafood Putra is 2.54 times more volatile than FAP Agri Tbk. It trades about -0.21 of its total potential returns per unit of risk. FAP Agri Tbk is currently generating about -0.08 per unit of volatility. If you would invest  540,000  in FAP Agri Tbk on December 4, 2024 and sell it today you would lose (2,500) from holding FAP Agri Tbk or give up 0.46% of portfolio value over 90 days.

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

Garudafood Putra Putri  vs.  FAP Agri Tbk

Garudafood Putra Putri

Risk-Adjusted Performance

Very Weak

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

FAP Agri Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days FAP Agri Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, FAP Agri 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 Garudafood Putra and FAP Agri

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

The idea behind Garudafood Putra Putri and FAP Agri 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.