Correlation Between Citra Marga and Gajah Tunggal

Can any of the company-specific risk be diversified away by investing in both Citra Marga and Gajah Tunggal 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 Citra Marga and Gajah Tunggal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citra Marga Nusaphala and Gajah Tunggal Tbk, you can compare the effects of market volatilities on Citra Marga and Gajah Tunggal 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 Citra Marga with a short position of Gajah Tunggal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citra Marga and Gajah Tunggal.

Diversification Opportunities for Citra Marga and Gajah Tunggal

0.65

Correlation Coefficient

Citra Marga  Gajah Tunggal

Poor diversification

The 3 months correlation between Citra and Gajah is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citra Marga Nusaphala and Gajah Tunggal Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gajah Tunggal Tbk and Citra Marga 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 Citra Marga Nusaphala are associated (or correlated) with Gajah Tunggal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gajah Tunggal Tbk has no effect on the direction of Citra Marga i.e., Citra Marga and Gajah Tunggal go up and down completely randomly.

Pair Corralation between Citra Marga and Gajah Tunggal

Assuming the 90 days trading horizon Citra Marga Nusaphala is expected to generate 0.34 times more return on investment than Gajah Tunggal. However, Citra Marga Nusaphala is 2.94 times less risky than Gajah Tunggal. It trades about -0.14 of its potential returns per unit of risk. Gajah Tunggal Tbk is currently generating about -0.07 per unit of risk. If you would invest  142,000  in Citra Marga Nusaphala on September 16, 2024 and sell it today you would lose (3,000) from holding Citra Marga Nusaphala or give up 2.11% of portfolio value over 90 days.

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

Citra Marga Nusaphala  vs.  Gajah Tunggal Tbk

Citra Marga Nusaphala

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citra Marga Nusaphala has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Gajah Tunggal Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gajah Tunggal Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Citra Marga and Gajah Tunggal

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

The idea behind Citra Marga Nusaphala and Gajah Tunggal 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.