Correlation Between Transcoal Pacific and Guna Timur

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

By analyzing existing cross correlation between Transcoal Pacific Tbk and Guna Timur Raya, you can compare the effects of market volatilities on Transcoal Pacific and Guna Timur 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 Transcoal Pacific with a short position of Guna Timur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcoal Pacific and Guna Timur.

Diversification Opportunities for Transcoal Pacific and Guna Timur

-0.32

Correlation Coefficient

Transcoal Pacific  Guna Timur

Very good diversification

The 3 months correlation between Transcoal and Guna is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Transcoal Pacific Tbk and Guna Timur Raya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guna Timur Raya and Transcoal Pacific 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 Transcoal Pacific Tbk are associated (or correlated) with Guna Timur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guna Timur Raya has no effect on the direction of Transcoal Pacific i.e., Transcoal Pacific and Guna Timur go up and down completely randomly.

Pair Corralation between Transcoal Pacific and Guna Timur

Assuming the 90 days trading horizon Transcoal Pacific Tbk is expected to under-perform the Guna Timur. But the stock apears to be less risky and, when comparing its historical volatility, Transcoal Pacific Tbk is 1.31 times less risky than Guna Timur. The stock trades about -0.12 of its potential returns per unit of risk. The Guna Timur Raya is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  8,400  in Guna Timur Raya on December 30, 2024 and sell it today you would earn a total of  2,400  from holding Guna Timur Raya or generate 28.57% return on investment over 90 days.

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

Transcoal Pacific Tbk  vs.  Guna Timur Raya

Transcoal Pacific Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transcoal Pacific Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Guna Timur Raya

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guna Timur Raya are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Guna Timur disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transcoal Pacific and Guna Timur

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

The idea behind Transcoal Pacific Tbk and Guna Timur Raya 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.