Correlation Between Elang Mahkota and Garudafood Putra

Can any of the company-specific risk be diversified away by investing in both Elang Mahkota and Garudafood Putra 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 Elang Mahkota and Garudafood Putra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elang Mahkota Teknologi and Garudafood Putra Putri, you can compare the effects of market volatilities on Elang Mahkota and Garudafood Putra 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 Elang Mahkota with a short position of Garudafood Putra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elang Mahkota and Garudafood Putra.

Diversification Opportunities for Elang Mahkota and Garudafood Putra

0.28

Correlation Coefficient

Elang Mahkota  Garudafood Putra

Modest diversification

The 3 months correlation between Elang and Garudafood is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Elang Mahkota Teknologi and Garudafood Putra Putri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garudafood Putra Putri and Elang Mahkota 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 Elang Mahkota Teknologi are associated (or correlated) with Garudafood Putra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garudafood Putra Putri has no effect on the direction of Elang Mahkota i.e., Elang Mahkota and Garudafood Putra go up and down completely randomly.

Pair Corralation between Elang Mahkota and Garudafood Putra

Assuming the 90 days trading horizon Elang Mahkota Teknologi is expected to generate 1.87 times more return on investment than Garudafood Putra. However, Elang Mahkota is 1.87 times more volatile than Garudafood Putra Putri. It trades about 0.2 of its potential returns per unit of risk. Garudafood Putra Putri is currently generating about 0.06 per unit of risk. If you would invest  40,400  in Elang Mahkota Teknologi on September 12, 2024 and sell it today you would earn a total of  21,100  from holding Elang Mahkota Teknologi or generate 52.23% return on investment over 90 days.

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

Elang Mahkota Teknologi  vs.  Garudafood Putra Putri

Elang Mahkota Teknologi

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elang Mahkota Teknologi are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Elang Mahkota disclosed solid returns over the last few months and may actually be approaching a breakup point.

Garudafood Putra Putri

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garudafood Putra Putri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Garudafood Putra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elang Mahkota and Garudafood Putra

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

The idea behind Elang Mahkota Teknologi and Garudafood Putra Putri 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.