Correlation Between Hoffmen Cleanindo and Garuda Metalindo

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

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

Diversification Opportunities for Hoffmen Cleanindo and Garuda Metalindo

-0.3

Correlation Coefficient

Hoffmen Cleanindo  Garuda Metalindo

Very good diversification

The 3 months correlation between Hoffmen and Garuda is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hoffmen Cleanindo 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 Hoffmen Cleanindo 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 Hoffmen Cleanindo 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 Hoffmen Cleanindo i.e., Hoffmen Cleanindo and Garuda Metalindo go up and down completely randomly.

Pair Corralation between Hoffmen Cleanindo and Garuda Metalindo

Assuming the 90 days trading horizon Hoffmen Cleanindo is expected to generate 1.27 times more return on investment than Garuda Metalindo. However, Hoffmen Cleanindo is 1.27 times more volatile than Garuda Metalindo Tbk. It trades about 0.07 of its potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about 0.07 per unit of risk. If you would invest  17,600  in Hoffmen Cleanindo on October 20, 2024 and sell it today you would earn a total of  1,500  from holding Hoffmen Cleanindo or generate 8.52% return on investment over 90 days.

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

Hoffmen Cleanindo  vs.  Garuda Metalindo Tbk

Hoffmen Cleanindo

Risk-Adjusted Performance

5 of 100

Modest

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

Garuda Metalindo Tbk

Risk-Adjusted Performance

5 of 100

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 February 2025.

Pair Trading with Hoffmen Cleanindo and Garuda Metalindo

The main advantage of trading using opposite Hoffmen Cleanindo and Garuda Metalindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hoffmen Cleanindo 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 Hoffmen Cleanindo 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.