Correlation Between Kedawung Setia and Garuda Metalindo

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

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

Diversification Opportunities for Kedawung Setia and Garuda Metalindo

0.24

Correlation Coefficient

Kedawung Setia  Garuda Metalindo

Modest diversification

The 3 months correlation between Kedawung and Garuda is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kedawung Setia Industrial 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 Kedawung Setia 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 Kedawung Setia Industrial 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 Kedawung Setia i.e., Kedawung Setia and Garuda Metalindo go up and down completely randomly.

Pair Corralation between Kedawung Setia and Garuda Metalindo

Assuming the 90 days trading horizon Kedawung Setia Industrial is expected to under-perform the Garuda Metalindo. In addition to that, Kedawung Setia is 2.84 times more volatile than Garuda Metalindo Tbk. It trades about -0.02 of its total potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about 0.08 per unit of volatility. If you would invest  124,500  in Garuda Metalindo Tbk on December 2, 2024 and sell it today you would earn a total of  8,000  from holding Garuda Metalindo Tbk or generate 6.43% return on investment over 90 days.

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

Kedawung Setia Industrial  vs.  Garuda Metalindo Tbk

Kedawung Setia Industrial

Risk-Adjusted Performance

Very Weak

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

Garuda Metalindo Tbk

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Garuda Metalindo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kedawung Setia and Garuda Metalindo

The main advantage of trading using opposite Kedawung Setia and Garuda Metalindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kedawung Setia 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 Kedawung Setia Industrial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.