Correlation Between Gudang Garam and Resource Alam
Can any of the company-specific risk be diversified away by investing in both Gudang Garam and Resource Alam 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 Resource Alam 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 Resource Alam Indonesia, you can compare the effects of market volatilities on Gudang Garam and Resource Alam 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 Resource Alam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gudang Garam and Resource Alam.
Diversification Opportunities for Gudang Garam and Resource Alam
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gudang and Resource is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Resource Alam Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resource Alam 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 Resource Alam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resource Alam Indonesia has no effect on the direction of Gudang Garam i.e., Gudang Garam and Resource Alam go up and down completely randomly.
Pair Corralation between Gudang Garam and Resource Alam
Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the Resource Alam. But the stock apears to be less risky and, when comparing its historical volatility, Gudang Garam Tbk is 1.8 times less risky than Resource Alam. The stock trades about -0.57 of its potential returns per unit of risk. The Resource Alam Indonesia is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest 59,000 in Resource Alam Indonesia on August 24, 2024 and sell it today you would lose (5,500) from holding Resource Alam Indonesia or give up 9.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gudang Garam Tbk vs. Resource Alam Indonesia
Performance |
| Timeline |
| Gudang Garam Tbk |
| Resource Alam Indonesia |
Gudang Garam and Resource Alam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gudang Garam and Resource Alam
The main advantage of trading using opposite Gudang Garam and Resource Alam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gudang Garam position performs unexpectedly, Resource Alam 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 Resource Alam will offset losses from the drop in Resource Alam'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 |
| Resource Alam vs. Bakrieland Development Tbk | Resource Alam vs. Bakrie Sumatera Plantations | Resource Alam vs. Bakrie Brothers Tbk | Resource Alam vs. Darma Henwa 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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