Correlation Between Garuda Metalindo and Pertamina Geothermal

Can any of the company-specific risk be diversified away by investing in both Garuda Metalindo and Pertamina Geothermal 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 Pertamina Geothermal 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 Pertamina Geothermal Energy, you can compare the effects of market volatilities on Garuda Metalindo and Pertamina Geothermal 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 Pertamina Geothermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Metalindo and Pertamina Geothermal.

Diversification Opportunities for Garuda Metalindo and Pertamina Geothermal

-0.62

Correlation Coefficient

Garuda Metalindo  Pertamina Geothermal

Excellent diversification

The 3 months correlation between Garuda and Pertamina is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Metalindo Tbk and Pertamina Geothermal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pertamina Geothermal 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 Pertamina Geothermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pertamina Geothermal has no effect on the direction of Garuda Metalindo i.e., Garuda Metalindo and Pertamina Geothermal go up and down completely randomly.

Pair Corralation between Garuda Metalindo and Pertamina Geothermal

Assuming the 90 days trading horizon Garuda Metalindo Tbk is expected to generate 1.22 times more return on investment than Pertamina Geothermal. However, Garuda Metalindo is 1.22 times more volatile than Pertamina Geothermal Energy. It trades about 0.21 of its potential returns per unit of risk. Pertamina Geothermal Energy is currently generating about -0.16 per unit of risk. If you would invest  104,000  in Garuda Metalindo Tbk on September 17, 2024 and sell it today you would earn a total of  26,000  from holding Garuda Metalindo Tbk or generate 25.0% 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.  Pertamina Geothermal Energy

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.

Pertamina Geothermal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pertamina Geothermal Energy 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 Pertamina Geothermal

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

The idea behind Garuda Metalindo Tbk and Pertamina Geothermal Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.