Correlation Between Indo Borax and Garuda Construction

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

By analyzing existing cross correlation between Indo Borax Chemicals and Garuda Construction Engineering, you can compare the effects of market volatilities on Indo Borax and Garuda Construction 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 Indo Borax with a short position of Garuda Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indo Borax and Garuda Construction.

Diversification Opportunities for Indo Borax and Garuda Construction

0.57

Correlation Coefficient

Indo Borax  Garuda Construction

Very weak diversification

The 3 months correlation between Indo and Garuda is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Indo Borax Chemicals and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction and Indo Borax 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 Indo Borax Chemicals are associated (or correlated) with Garuda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Construction has no effect on the direction of Indo Borax i.e., Indo Borax and Garuda Construction go up and down completely randomly.

Pair Corralation between Indo Borax and Garuda Construction

Assuming the 90 days trading horizon Indo Borax Chemicals is expected to generate 0.68 times more return on investment than Garuda Construction. However, Indo Borax Chemicals is 1.48 times less risky than Garuda Construction. It trades about -0.02 of its potential returns per unit of risk. Garuda Construction Engineering is currently generating about -0.07 per unit of risk. If you would invest  18,041  in Indo Borax Chemicals on December 30, 2024 and sell it today you would lose (1,017) from holding Indo Borax Chemicals or give up 5.64% of portfolio value over 90 days.

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

Indo Borax Chemicals  vs.  Garuda Construction Engineerin

Indo Borax Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Garuda Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Indo Borax and Garuda Construction

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

The idea behind Indo Borax Chemicals and Garuda Construction Engineering 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.