Correlation Between Garuda Metalindo and Optima Prima

Can any of the company-specific risk be diversified away by investing in both Garuda Metalindo and Optima Prima 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 Garuda Metalindo and Optima Prima into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garuda Metalindo Tbk and Optima Prima Metal, you can compare the effects of market volatilities on Garuda Metalindo and Optima Prima 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 Garuda Metalindo with a short position of Optima Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Metalindo and Optima Prima.

Diversification Opportunities for Garuda Metalindo and Optima Prima

-0.67

Correlation Coefficient

Garuda Metalindo  Optima Prima

Excellent diversification

The 3 months correlation between Garuda and Optima is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Optima Prima Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Prima Metal and Garuda Metalindo 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 Garuda Metalindo Tbk are associated (or correlated) with Optima Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Prima Metal has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Optima Prima go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Optima Prima

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 0.47 times more return on investment than Optima Prima. However, Garuda Metalindo Tbk is 2.14 times less risky than Optima Prima. It trades about 0.2 of its potential returns per unit of risk. Optima Prima Metal is currently generating about -0.27 per unit of risk. If you would invest  104,500  in Garuda Metalindo Tbk on September 13, 2024 and sell it today you would earn a total of  25,500  from holding Garuda Metalindo Tbk or generate 24.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Garuda Metalindo Tbk  vs.  Optima Prima Metal

Garuda Metalindo Tbk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Garuda Metalindo disclosed solid returns over the last few months and may actually be approaching a breakup point.

Optima Prima Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Prima Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Garuda Metalindo and Optima Prima

The main advantage of trading using opposite Garuda Metalindo and Optima Prima positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garuda Metalindo position performs unexpectedly, Optima Prima 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 Optima Prima will offset losses from the drop in Optima Prima's long position.

The idea behind Garuda Metalindo Tbk and Optima Prima Metal 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.