Correlation Between COMMERCIAL VEHICLE and GUDANG GARAM

Can any of the company-specific risk be diversified away by investing in both COMMERCIAL VEHICLE and GUDANG GARAM 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 COMMERCIAL VEHICLE and GUDANG GARAM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COMMERCIAL VEHICLE and GUDANG GARAM, you can compare the effects of market volatilities on COMMERCIAL VEHICLE and GUDANG GARAM 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 COMMERCIAL VEHICLE with a short position of GUDANG GARAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL VEHICLE and GUDANG GARAM.

Diversification Opportunities for COMMERCIAL VEHICLE and GUDANG GARAM

0.87

Correlation Coefficient

COMMERCIAL VEHICLE  GUDANG GARAM

Very poor diversification

The 3 months correlation between COMMERCIAL and GUDANG is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and GUDANG GARAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUDANG GARAM and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE are associated (or correlated) with GUDANG GARAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUDANG GARAM has no effect on the direction of COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and GUDANG GARAM go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and GUDANG GARAM

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to generate 3.14 times more return on investment than GUDANG GARAM. However, COMMERCIAL VEHICLE is 3.14 times more volatile than GUDANG GARAM. It trades about -0.07 of its potential returns per unit of risk. GUDANG GARAM is currently generating about -0.24 per unit of risk. If you would invest  302.00  in COMMERCIAL VEHICLE on September 4, 2024 and sell it today you would lose (74.00) from holding COMMERCIAL VEHICLE or give up 24.5% of portfolio value over 90 days.

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

COMMERCIAL VEHICLE  vs.  GUDANG GARAM

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GUDANG GARAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUDANG GARAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with COMMERCIAL VEHICLE and GUDANG GARAM

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

The idea behind COMMERCIAL VEHICLE and GUDANG GARAM 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.