Correlation Between Equity Development and Garuda Metalindo

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

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

Diversification Opportunities for Equity Development and Garuda Metalindo

0.03

Correlation Coefficient

Equity Development  Garuda Metalindo

Significant diversification

The 3 months correlation between Equity and Garuda is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Equity Development Investment and Garuda Metalindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Metalindo Tbk and Equity Development 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 Equity Development Investment are associated (or correlated) with Garuda Metalindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Metalindo Tbk has no effect on the direction of Equity Development i.e., Equity Development and Garuda Metalindo go up and down completely randomly.

Pair Corralation between Equity Development and Garuda Metalindo

Assuming the 90 days trading horizon Equity Development Investment is expected to generate 1.43 times more return on investment than Garuda Metalindo. However, Equity Development is 1.43 times more volatile than Garuda Metalindo Tbk. It trades about 0.0 of its potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about -0.05 per unit of risk. If you would invest  5,400  in Equity Development Investment on December 30, 2024 and sell it today you would lose (100.00) from holding Equity Development Investment or give up 1.85% of portfolio value over 90 days.

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

Equity Development Investment  vs.  Garuda Metalindo Tbk

Equity Development

Risk-Adjusted Performance

Very Weak

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

Garuda Metalindo Tbk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Equity Development and Garuda Metalindo

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

The idea behind Equity Development Investment and Garuda Metalindo 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 Global Correlations module to find global opportunities by holding instruments from different markets.