Correlation Between Zeon and PT Gajah

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

By analyzing existing cross correlation between Zeon Corporation and PT Gajah Tunggal, you can compare the effects of market volatilities on Zeon and PT Gajah 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 Zeon with a short position of PT Gajah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zeon and PT Gajah.

Diversification Opportunities for Zeon and PT Gajah

-0.27

Correlation Coefficient

Zeon  PT Gajah

Very good diversification

The 3 months correlation between Zeon and GH8 is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Zeon Corp. and PT Gajah Tunggal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Gajah Tunggal and Zeon 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 Zeon Corporation are associated (or correlated) with PT Gajah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Gajah Tunggal has no effect on the direction of Zeon i.e., Zeon and PT Gajah go up and down completely randomly.

Pair Corralation between Zeon and PT Gajah

Assuming the 90 days horizon Zeon is expected to generate 48.88 times less return on investment than PT Gajah. But when comparing it to its historical volatility, Zeon Corporation is 4.38 times less risky than PT Gajah. It trades about 0.01 of its potential returns per unit of risk. PT Gajah Tunggal is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.90  in PT Gajah Tunggal on September 23, 2024 and sell it today you would earn a total of  4.25  from holding PT Gajah Tunggal or generate 223.68% return on investment over 90 days.

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

Zeon Corp.  vs.  PT Gajah Tunggal

Zeon

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zeon Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zeon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PT Gajah Tunggal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Gajah Tunggal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Gajah is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zeon and PT Gajah

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

The idea behind Zeon Corporation and PT Gajah Tunggal 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.