Correlation Between Indonesian Tobacco and Garudafood Putra

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

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

Diversification Opportunities for Indonesian Tobacco and Garudafood Putra

0.63

Correlation Coefficient

Indonesian Tobacco  Garudafood Putra

Poor diversification

The 3 months correlation between Indonesian and Garudafood is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Indonesian Tobacco Tbk and Garudafood Putra Putri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garudafood Putra Putri and Indonesian Tobacco 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 Indonesian Tobacco Tbk are associated (or correlated) with Garudafood Putra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garudafood Putra Putri has no effect on the direction of Indonesian Tobacco i.e., Indonesian Tobacco and Garudafood Putra go up and down completely randomly.

Pair Corralation between Indonesian Tobacco and Garudafood Putra

Assuming the 90 days trading horizon Indonesian Tobacco Tbk is expected to under-perform the Garudafood Putra. In addition to that, Indonesian Tobacco is 1.49 times more volatile than Garudafood Putra Putri. It trades about -0.16 of its total potential returns per unit of risk. Garudafood Putra Putri is currently generating about -0.08 per unit of volatility. If you would invest  40,000  in Garudafood Putra Putri on December 2, 2024 and sell it today you would lose (2,200) from holding Garudafood Putra Putri or give up 5.5% of portfolio value over 90 days.

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

Indonesian Tobacco Tbk  vs.  Garudafood Putra Putri

Indonesian Tobacco Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indonesian Tobacco Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Indonesian Tobacco and Garudafood Putra

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

The idea behind Indonesian Tobacco Tbk and Garudafood Putra Putri 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.