Correlation Between Steel Pipe and Garuda Metalindo
Can any of the company-specific risk be diversified away by investing in both Steel Pipe 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 Steel Pipe and Garuda Metalindo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Pipe Industry and Garuda Metalindo Tbk, you can compare the effects of market volatilities on Steel Pipe 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 Steel Pipe with a short position of Garuda Metalindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Pipe and Garuda Metalindo.
Diversification Opportunities for Steel Pipe and Garuda Metalindo
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Garuda is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Steel Pipe Industry 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 Steel Pipe 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 Steel Pipe Industry 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 Steel Pipe i.e., Steel Pipe and Garuda Metalindo go up and down completely randomly.
Pair Corralation between Steel Pipe and Garuda Metalindo
Assuming the 90 days trading horizon Steel Pipe is expected to generate 5.73 times less return on investment than Garuda Metalindo. But when comparing it to its historical volatility, Steel Pipe Industry is 1.43 times less risky than Garuda Metalindo. It trades about 0.05 of its potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 76,425 in Garuda Metalindo Tbk on August 29, 2024 and sell it today you would earn a total of 39,075 from holding Garuda Metalindo Tbk or generate 51.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Pipe Industry vs. Garuda Metalindo Tbk
Performance |
| Timeline |
| Steel Pipe Industry |
| Garuda Metalindo Tbk |
Steel Pipe and Garuda Metalindo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Pipe and Garuda Metalindo
The main advantage of trading using opposite Steel Pipe and Garuda Metalindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Pipe 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.| Steel Pipe vs. Barito Pacific Tbk | Steel Pipe vs. Charoen Pokphand Indonesia | Steel Pipe vs. Indocement Tunggal Prakarsa |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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