Correlation Between Guna Timur and PT Indonesia

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

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

Diversification Opportunities for Guna Timur and PT Indonesia

0.68

Correlation Coefficient

Guna Timur  PT Indonesia

Poor diversification

The 3 months correlation between Guna and IPCC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Guna Timur Raya and PT Indonesia Kendaraan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indonesia Kendaraan and Guna Timur 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 Guna Timur Raya are associated (or correlated) with PT Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indonesia Kendaraan has no effect on the direction of Guna Timur i.e., Guna Timur and PT Indonesia go up and down completely randomly.

Pair Corralation between Guna Timur and PT Indonesia

Assuming the 90 days trading horizon Guna Timur Raya is expected to generate 1.76 times more return on investment than PT Indonesia. However, Guna Timur is 1.76 times more volatile than PT Indonesia Kendaraan. It trades about 0.19 of its potential returns per unit of risk. PT Indonesia Kendaraan is currently generating about 0.07 per unit of risk. If you would invest  8,500  in Guna Timur Raya on December 21, 2024 and sell it today you would earn a total of  2,500  from holding Guna Timur Raya or generate 29.41% return on investment over 90 days.

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

Guna Timur Raya  vs.  PT Indonesia Kendaraan

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 15 (%) 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.

PT Indonesia Kendaraan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, PT Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Guna Timur and PT Indonesia

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

The idea behind Guna Timur Raya and PT Indonesia Kendaraan 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.