Correlation Between Lion Metal and Garuda Metalindo
Can any of the company-specific risk be diversified away by investing in both Lion Metal 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 Lion Metal and Garuda Metalindo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Metal Works and Garuda Metalindo Tbk, you can compare the effects of market volatilities on Lion Metal 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 Lion Metal with a short position of Garuda Metalindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Metal and Garuda Metalindo.
Diversification Opportunities for Lion Metal and Garuda Metalindo
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lion and Garuda is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lion Metal Works 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 Lion Metal 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 Lion Metal Works 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 Lion Metal i.e., Lion Metal and Garuda Metalindo go up and down completely randomly.
Pair Corralation between Lion Metal and Garuda Metalindo
Assuming the 90 days trading horizon Lion Metal Works is expected to under-perform the Garuda Metalindo. In addition to that, Lion Metal is 1.81 times more volatile than Garuda Metalindo Tbk. It trades about -0.17 of its total potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about 0.14 per unit of volatility. If you would invest 100,000 in Garuda Metalindo Tbk on August 28, 2024 and sell it today you would earn a total of 15,500 from holding Garuda Metalindo Tbk or generate 15.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Metal Works vs. Garuda Metalindo Tbk
Performance |
| Timeline |
| Lion Metal Works |
| Garuda Metalindo Tbk |
Lion Metal and Garuda Metalindo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Metal and Garuda Metalindo
The main advantage of trading using opposite Lion Metal and Garuda Metalindo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Metal 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.The idea behind Lion Metal Works and Garuda Metalindo Tbk pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Garuda Metalindo vs. Indo Kordsa Tbk | Garuda Metalindo vs. Indospring Tbk | Garuda Metalindo vs. Kabelindo Murni Tbk | Garuda Metalindo vs. Blue Bird 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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