Correlation Between Gozco Plantations and Hotel Fitra

Can any of the company-specific risk be diversified away by investing in both Gozco Plantations and Hotel Fitra 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 Gozco Plantations and Hotel Fitra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gozco Plantations Tbk and Hotel Fitra International, you can compare the effects of market volatilities on Gozco Plantations and Hotel Fitra 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 Gozco Plantations with a short position of Hotel Fitra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gozco Plantations and Hotel Fitra.

Diversification Opportunities for Gozco Plantations and Hotel Fitra

-0.1

Correlation Coefficient

Gozco Plantations  Hotel Fitra

Good diversification

The 3 months correlation between Gozco and Hotel is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gozco Plantations Tbk and Hotel Fitra International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Fitra International and Gozco Plantations 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 Gozco Plantations Tbk are associated (or correlated) with Hotel Fitra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Fitra International has no effect on the direction of Gozco Plantations i.e., Gozco Plantations and Hotel Fitra go up and down completely randomly.

Pair Corralation between Gozco Plantations and Hotel Fitra

Assuming the 90 days trading horizon Gozco Plantations Tbk is expected to under-perform the Hotel Fitra. In addition to that, Gozco Plantations is 2.49 times more volatile than Hotel Fitra International. It trades about -0.01 of its total potential returns per unit of risk. Hotel Fitra International is currently generating about 0.21 per unit of volatility. If you would invest  9,600  in Hotel Fitra International on December 1, 2024 and sell it today you would earn a total of  1,800  from holding Hotel Fitra International or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Gozco Plantations Tbk  vs.  Hotel Fitra International

Gozco Plantations Tbk

Risk-Adjusted Performance

Very Weak

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

Hotel Fitra International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hotel Fitra International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Hotel Fitra disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gozco Plantations and Hotel Fitra

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

The idea behind Gozco Plantations Tbk and Hotel Fitra International 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.