Correlation Between PT Steel and GMO Internet

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

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

Diversification Opportunities for PT Steel and GMO Internet

-0.39

Correlation Coefficient

PT Steel  GMO Internet

Very good diversification

The 3 months correlation between S08 and GMO is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and PT Steel 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 PT Steel Pipe are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of PT Steel i.e., PT Steel and GMO Internet go up and down completely randomly.

Pair Corralation between PT Steel and GMO Internet

Assuming the 90 days horizon PT Steel is expected to generate 2.76 times less return on investment than GMO Internet. But when comparing it to its historical volatility, PT Steel Pipe is 1.07 times less risky than GMO Internet. It trades about 0.03 of its potential returns per unit of risk. GMO Internet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  266.00  in GMO Internet on October 25, 2024 and sell it today you would earn a total of  1,354  from holding GMO Internet or generate 509.02% return on investment over 90 days.

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

PT Steel Pipe  vs.  GMO Internet

PT Steel Pipe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Steel Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

GMO Internet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PT Steel and GMO Internet

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

The idea behind PT Steel Pipe and GMO Internet 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.