Correlation Between Merdeka Copper and Garuda Metalindo

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

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

Diversification Opportunities for Merdeka Copper and Garuda Metalindo

0.23

Correlation Coefficient

Merdeka Copper  Garuda Metalindo

Modest diversification

The 3 months correlation between Merdeka and Garuda is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Merdeka Copper Gold 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 Merdeka Copper 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 Merdeka Copper Gold 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 Merdeka Copper i.e., Merdeka Copper and Garuda Metalindo go up and down completely randomly.

Pair Corralation between Merdeka Copper and Garuda Metalindo

Assuming the 90 days trading horizon Merdeka Copper Gold is expected to generate 2.7 times more return on investment than Garuda Metalindo. However, Merdeka Copper is 2.7 times more volatile than Garuda Metalindo Tbk. It trades about -0.02 of its potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about -0.06 per unit of risk. If you would invest  159,500  in Merdeka Copper Gold on December 31, 2024 and sell it today you would lose (16,500) from holding Merdeka Copper Gold or give up 10.34% of portfolio value over 90 days.

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

Merdeka Copper Gold  vs.  Garuda Metalindo Tbk

Merdeka Copper Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merdeka Copper Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Merdeka Copper 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

Very Weak

Over the last 90 days Garuda Metalindo Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Garuda Metalindo 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 Merdeka Copper and Garuda Metalindo

The main advantage of trading using opposite Merdeka Copper and Garuda Metalindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merdeka Copper 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 Merdeka Copper Gold 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.