Correlation Between Guna Timur and Transcoal Pacific

Can any of the company-specific risk be diversified away by investing in both Guna Timur and Transcoal Pacific 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 Transcoal Pacific 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 Transcoal Pacific Tbk, you can compare the effects of market volatilities on Guna Timur and Transcoal Pacific 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 Transcoal Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guna Timur and Transcoal Pacific.

Diversification Opportunities for Guna Timur and Transcoal Pacific

-0.16

Correlation Coefficient

Guna Timur  Transcoal Pacific

Good diversification

The 3 months correlation between Guna and Transcoal is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Guna Timur Raya and Transcoal Pacific Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcoal Pacific Tbk 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 Transcoal Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcoal Pacific Tbk has no effect on the direction of Guna Timur i.e., Guna Timur and Transcoal Pacific go up and down completely randomly.

Pair Corralation between Guna Timur and Transcoal Pacific

Assuming the 90 days trading horizon Guna Timur Raya is expected to generate 1.39 times more return on investment than Transcoal Pacific. However, Guna Timur is 1.39 times more volatile than Transcoal Pacific Tbk. It trades about 0.18 of its potential returns per unit of risk. Transcoal Pacific Tbk is currently generating about -0.11 per unit of risk. If you would invest  8,500  in Guna Timur Raya on December 22, 2024 and sell it today you would earn a total of  2,400  from holding Guna Timur Raya or generate 28.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Guna Timur Raya  vs.  Transcoal Pacific Tbk

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.

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 latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Guna Timur and Transcoal Pacific

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

The idea behind Guna Timur Raya and Transcoal Pacific Tbk 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.