Correlation Between Diamond Food and Garuda Metalindo
Can any of the company-specific risk be diversified away by investing in both Diamond Food and Garuda Metalindo 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 Diamond Food and Garuda Metalindo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Food Indonesia and Garuda Metalindo Tbk, you can compare the effects of market volatilities on Diamond Food and Garuda Metalindo 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 Diamond Food with a short position of Garuda Metalindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Food and Garuda Metalindo.
Diversification Opportunities for Diamond Food and Garuda Metalindo
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Diamond and Garuda is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Food Indonesia and Garuda Metalindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Metalindo Tbk and Diamond Food 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 Diamond Food Indonesia are associated (or correlated) with Garuda Metalindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Metalindo Tbk has no effect on the direction of Diamond Food i.e., Diamond Food and Garuda Metalindo go up and down completely randomly.
Pair Corralation between Diamond Food and Garuda Metalindo
Assuming the 90 days trading horizon Diamond Food Indonesia is expected to under-perform the Garuda Metalindo. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Food Indonesia is 1.93 times less risky than Garuda Metalindo. The stock trades about -0.07 of its potential returns per unit of risk. The Garuda Metalindo Tbk is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 105,500 in Garuda Metalindo Tbk on September 2, 2024 and sell it today you would earn a total of 16,500 from holding Garuda Metalindo Tbk or generate 15.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Food Indonesia vs. Garuda Metalindo Tbk
Performance |
| Timeline |
| Diamond Food Indonesia |
| Garuda Metalindo Tbk |
Diamond Food and Garuda Metalindo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Food and Garuda Metalindo
The main advantage of trading using opposite Diamond Food and Garuda Metalindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Food position performs unexpectedly, Garuda Metalindo 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 Metalindo will offset losses from the drop in Garuda Metalindo's long position.| Diamond Food vs. Garudafood Putra Putri | Diamond Food vs. Estika Tata Tiara | Diamond Food vs. Campina Ice Cream | Diamond Food vs. PT Wahana Interfood |
| Garuda Metalindo vs. Matahari Department Store | Garuda Metalindo vs. Multi Medika Internasional | Garuda Metalindo vs. Visi Media Asia | Garuda Metalindo vs. Bayan Resources Tbk |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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