Correlation Between Krakatau Steel and Garuda Metalindo
Can any of the company-specific risk be diversified away by investing in both Krakatau Steel 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 Krakatau Steel and Garuda Metalindo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Krakatau Steel Persero and Garuda Metalindo Tbk, you can compare the effects of market volatilities on Krakatau Steel 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 Krakatau Steel with a short position of Garuda Metalindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krakatau Steel and Garuda Metalindo.
Diversification Opportunities for Krakatau Steel and Garuda Metalindo
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Krakatau and Garuda is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Krakatau Steel Persero 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 Krakatau Steel 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 Krakatau Steel Persero 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 Krakatau Steel i.e., Krakatau Steel and Garuda Metalindo go up and down completely randomly.
Pair Corralation between Krakatau Steel and Garuda Metalindo
Assuming the 90 days trading horizon Krakatau Steel Persero is expected to under-perform the Garuda Metalindo. In addition to that, Krakatau Steel is 1.29 times more volatile than Garuda Metalindo Tbk. It trades about -0.06 of its total potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about 0.05 per unit of volatility. If you would invest 73,960 in Garuda Metalindo Tbk on August 29, 2024 and sell it today you would earn a total of 41,540 from holding Garuda Metalindo Tbk or generate 56.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Krakatau Steel Persero vs. Garuda Metalindo Tbk
Performance |
| Timeline |
| Krakatau Steel Persero |
| Garuda Metalindo Tbk |
Krakatau Steel and Garuda Metalindo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Krakatau Steel and Garuda Metalindo
The main advantage of trading using opposite Krakatau Steel and Garuda Metalindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Krakatau Steel 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.| Krakatau Steel vs. Timah Persero Tbk | Krakatau Steel vs. Garuda Indonesia Persero | Krakatau Steel vs. Jasa Marga Tbk | Krakatau Steel vs. Semen Indonesia Persero |
| Garuda Metalindo vs. Pelayaran Nelly Dwi | Garuda Metalindo vs. Buana Listya Tama | Garuda Metalindo vs. Mitrabahtera Segara Sejati | Garuda Metalindo vs. Trans Power Marine |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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