Correlation Between Unilever Indonesia and Garuda Indonesia

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

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

Diversification Opportunities for Unilever Indonesia and Garuda Indonesia

0.89

Correlation Coefficient

Unilever Indonesia  Garuda Indonesia

Very poor diversification

The 3 months correlation between Unilever and Garuda is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Indonesia Tbk and Garuda Indonesia Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Indonesia Persero and Unilever Indonesia 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 Unilever Indonesia Tbk are associated (or correlated) with Garuda Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Indonesia Persero has no effect on the direction of Unilever Indonesia i.e., Unilever Indonesia and Garuda Indonesia go up and down completely randomly.

Pair Corralation between Unilever Indonesia and Garuda Indonesia

Assuming the 90 days trading horizon Unilever Indonesia Tbk is expected to under-perform the Garuda Indonesia. In addition to that, Unilever Indonesia is 1.89 times more volatile than Garuda Indonesia Persero. It trades about -0.28 of its total potential returns per unit of risk. Garuda Indonesia Persero is currently generating about -0.32 per unit of volatility. If you would invest  6,100  in Garuda Indonesia Persero on December 1, 2024 and sell it today you would lose (1,700) from holding Garuda Indonesia Persero or give up 27.87% of portfolio value over 90 days.

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

Unilever Indonesia Tbk  vs.  Garuda Indonesia Persero

Unilever Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unilever Indonesia 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.

Garuda Indonesia Persero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garuda Indonesia Persero 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.

Pair Trading with Unilever Indonesia and Garuda Indonesia

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

The idea behind Unilever Indonesia Tbk and Garuda Indonesia Persero 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.