Correlation Between NCC and Garuda Construction

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

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

Diversification Opportunities for NCC and Garuda Construction

0.53

Correlation Coefficient

NCC  Garuda Construction

Very weak diversification

The 3 months correlation between NCC and Garuda is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NCC Limited and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction and NCC 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 NCC Limited are associated (or correlated) with Garuda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Construction has no effect on the direction of NCC i.e., NCC and Garuda Construction go up and down completely randomly.

Pair Corralation between NCC and Garuda Construction

Assuming the 90 days trading horizon NCC Limited is expected to generate 0.52 times more return on investment than Garuda Construction. However, NCC Limited is 1.91 times less risky than Garuda Construction. It trades about 0.04 of its potential returns per unit of risk. Garuda Construction Engineering is currently generating about -0.06 per unit of risk. If you would invest  30,050  in NCC Limited on September 4, 2024 and sell it today you would earn a total of  860.00  from holding NCC Limited or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.33%
Values	Daily Returns

NCC Limited  vs.  Garuda Construction Engineerin

NCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, NCC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NCC and Garuda Construction

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

The idea behind NCC Limited and Garuda Construction Engineering 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.