Correlation Between Malindo Feedmill and Gozco Plantations

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

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

Diversification Opportunities for Malindo Feedmill and Gozco Plantations

0.3

Correlation Coefficient

Malindo Feedmill  Gozco Plantations

Weak diversification

The 3 months correlation between Malindo and Gozco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Malindo Feedmill Tbk and Gozco Plantations Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gozco Plantations Tbk and Malindo Feedmill 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 Malindo Feedmill Tbk are associated (or correlated) with Gozco Plantations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gozco Plantations Tbk has no effect on the direction of Malindo Feedmill i.e., Malindo Feedmill and Gozco Plantations go up and down completely randomly.

Pair Corralation between Malindo Feedmill and Gozco Plantations

Assuming the 90 days trading horizon Malindo Feedmill Tbk is expected to generate 0.87 times more return on investment than Gozco Plantations. However, Malindo Feedmill Tbk is 1.15 times less risky than Gozco Plantations. It trades about 0.05 of its potential returns per unit of risk. Gozco Plantations Tbk is currently generating about -0.09 per unit of risk. If you would invest  76,500  in Malindo Feedmill Tbk on December 30, 2024 and sell it today you would earn a total of  4,500  from holding Malindo Feedmill Tbk or generate 5.88% return on investment over 90 days.

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

Malindo Feedmill Tbk  vs.  Gozco Plantations Tbk

Malindo Feedmill Tbk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Malindo Feedmill Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Malindo Feedmill may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 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.

Pair Trading with Malindo Feedmill and Gozco Plantations

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

The idea behind Malindo Feedmill Tbk and Gozco Plantations 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.