Correlation Between Gudang Garam and Bank Negara
Can any of the company-specific risk be diversified away by investing in both Gudang Garam and Bank Negara 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 Gudang Garam and Bank Negara into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gudang Garam Tbk and Bank Negara Indonesia, you can compare the effects of market volatilities on Gudang Garam and Bank Negara 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 Gudang Garam with a short position of Bank Negara. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gudang Garam and Bank Negara.
Diversification Opportunities for Gudang Garam and Bank Negara
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gudang and Bank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia and Gudang Garam 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 Gudang Garam Tbk are associated (or correlated) with Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of Gudang Garam i.e., Gudang Garam and Bank Negara go up and down completely randomly.
Pair Corralation between Gudang Garam and Bank Negara
Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the Bank Negara. But the stock apears to be less risky and, when comparing its historical volatility, Gudang Garam Tbk is 1.46 times less risky than Bank Negara. The stock trades about -0.24 of its potential returns per unit of risk. The Bank Negara Indonesia is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 520,000 in Bank Negara Indonesia on September 2, 2024 and sell it today you would lose (22,000) from holding Bank Negara Indonesia or give up 4.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gudang Garam Tbk vs. Bank Negara Indonesia
Performance |
| Timeline |
| Gudang Garam Tbk |
| Bank Negara Indonesia |
Gudang Garam and Bank Negara Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gudang Garam and Bank Negara
The main advantage of trading using opposite Gudang Garam and Bank Negara positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gudang Garam position performs unexpectedly, Bank Negara 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 Bank Negara will offset losses from the drop in Bank Negara's long position.| Gudang Garam vs. Hanjaya Mandala Sampoerna | Gudang Garam vs. Unilever Indonesia Tbk | Gudang Garam vs. PT Indofood Sukses | Gudang Garam vs. United Tractors Tbk |
| Bank Negara vs. Ace Hardware Indonesia | Bank Negara vs. Merdeka Copper Gold | Bank Negara vs. Mitra Pinasthika Mustika | Bank Negara vs. Jakarta Int Hotels |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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