Correlation Between Gudang Garam and Capital Financial
Can any of the company-specific risk be diversified away by investing in both Gudang Garam and Capital Financial 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 Capital Financial 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 Capital Financial Indonesia, you can compare the effects of market volatilities on Gudang Garam and Capital Financial 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 Capital Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gudang Garam and Capital Financial.
Diversification Opportunities for Gudang Garam and Capital Financial
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gudang and Capital is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Capital Financial Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Financial 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 Capital Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Financial has no effect on the direction of Gudang Garam i.e., Gudang Garam and Capital Financial go up and down completely randomly.
Pair Corralation between Gudang Garam and Capital Financial
Assuming the 90 days trading horizon Gudang Garam Tbk is expected to generate 0.67 times more return on investment than Capital Financial. However, Gudang Garam Tbk is 1.5 times less risky than Capital Financial. It trades about -0.24 of its potential returns per unit of risk. Capital Financial Indonesia is currently generating about -0.18 per unit of risk. If you would invest 1,370,000 in Gudang Garam Tbk on September 2, 2024 and sell it today you would lose (85,000) from holding Gudang Garam Tbk or give up 6.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gudang Garam Tbk vs. Capital Financial Indonesia
Performance |
| Timeline |
| Gudang Garam Tbk |
| Capital Financial |
Gudang Garam and Capital Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gudang Garam and Capital Financial
The main advantage of trading using opposite Gudang Garam and Capital Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gudang Garam position performs unexpectedly, Capital Financial 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 Capital Financial will offset losses from the drop in Capital Financial'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 |
| Capital Financial vs. Ace Hardware Indonesia | Capital Financial vs. Merdeka Copper Gold | Capital Financial vs. Mitra Pinasthika Mustika | Capital Financial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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