Correlation Between Garudafood Putra and Sawit Sumbermas

Can any of the company-specific risk be diversified away by investing in both Garudafood Putra and Sawit Sumbermas 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 Sawit Sumbermas 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 Sawit Sumbermas Sarana, you can compare the effects of market volatilities on Garudafood Putra and Sawit Sumbermas 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 Sawit Sumbermas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garudafood Putra and Sawit Sumbermas.

Diversification Opportunities for Garudafood Putra and Sawit Sumbermas

-0.54

Correlation Coefficient

Garudafood Putra  Sawit Sumbermas

Excellent diversification

The 3 months correlation between Garudafood and Sawit is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Garudafood Putra Putri and Sawit Sumbermas Sarana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sawit Sumbermas Sarana 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 Sawit Sumbermas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sawit Sumbermas Sarana has no effect on the direction of Garudafood Putra i.e., Garudafood Putra and Sawit Sumbermas go up and down completely randomly.

Pair Corralation between Garudafood Putra and Sawit Sumbermas

Assuming the 90 days trading horizon Garudafood Putra Putri is expected to under-perform the Sawit Sumbermas. But the stock apears to be less risky and, when comparing its historical volatility, Garudafood Putra Putri is 3.22 times less risky than Sawit Sumbermas. The stock trades about -0.02 of its potential returns per unit of risk. The Sawit Sumbermas Sarana is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  108,500  in Sawit Sumbermas Sarana on December 2, 2024 and sell it today you would earn a total of  67,500  from holding Sawit Sumbermas Sarana or generate 62.21% return on investment over 90 days.

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

Garudafood Putra Putri  vs.  Sawit Sumbermas Sarana

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.

Sawit Sumbermas Sarana

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sawit Sumbermas Sarana are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sawit Sumbermas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garudafood Putra and Sawit Sumbermas

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

The idea behind Garudafood Putra Putri and Sawit Sumbermas Sarana 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.