Correlation Between Petrosea Tbk and Garuda Indonesia

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

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

Diversification Opportunities for Petrosea Tbk and Garuda Indonesia

-0.79

Correlation Coefficient

Petrosea Tbk  Garuda Indonesia

Pay attention - limited upside

The 3 months correlation between Petrosea and Garuda is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Petrosea Tbk and Garuda Indonesia Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Indonesia Persero and Petrosea Tbk 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 Petrosea Tbk are associated (or correlated) with Garuda Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Indonesia Persero has no effect on the direction of Petrosea Tbk i.e., Petrosea Tbk and Garuda Indonesia go up and down completely randomly.

Pair Corralation between Petrosea Tbk and Garuda Indonesia

Assuming the 90 days trading horizon Petrosea Tbk is expected to generate 1.79 times more return on investment than Garuda Indonesia. However, Petrosea Tbk is 1.79 times more volatile than Garuda Indonesia Persero. It trades about 0.31 of its potential returns per unit of risk. Garuda Indonesia Persero is currently generating about -0.19 per unit of risk. If you would invest  1,402,500  in Petrosea Tbk on September 29, 2024 and sell it today you would earn a total of  1,435,000  from holding Petrosea Tbk or generate 102.32% return on investment over 90 days.

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

Petrosea Tbk  vs.  Garuda Indonesia Persero

Petrosea Tbk

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Petrosea Tbk are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Petrosea Tbk disclosed solid returns over the last few months and may actually be approaching a breakup point.

Garuda Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Indonesia Persero 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Petrosea Tbk and Garuda Indonesia

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

The idea behind Petrosea Tbk and Garuda Indonesia Persero 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.