Correlation Between Transport and Garuda Construction

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

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

Diversification Opportunities for Transport and Garuda Construction

-0.3

Correlation Coefficient

Transport  Garuda Construction

Very good diversification

The 3 months correlation between Transport and Garuda is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Transport of and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction and Transport 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 Transport of 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 Transport i.e., Transport and Garuda Construction go up and down completely randomly.

Pair Corralation between Transport and Garuda Construction

Assuming the 90 days trading horizon Transport of is expected to generate 1.25 times more return on investment than Garuda Construction. However, Transport is 1.25 times more volatile than Garuda Construction Engineering. It trades about 0.05 of its potential returns per unit of risk. Garuda Construction Engineering is currently generating about 0.05 per unit of risk. If you would invest  83,812  in Transport of on September 21, 2024 and sell it today you would earn a total of  28,613  from holding Transport of or generate 34.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.74%
Values	Daily Returns

Transport of  vs.  Garuda Construction Engineerin

Transport

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transport of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Transport is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Garuda Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transport and Garuda Construction

The main advantage of trading using opposite Transport and Garuda Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport 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 Transport of 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.