Correlation Between Sentra Food and Garudafood Putra

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

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

Diversification Opportunities for Sentra Food and Garudafood Putra

0.02

Correlation Coefficient

Sentra Food  Garudafood Putra

Significant diversification

The 3 months correlation between Sentra and Garudafood is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sentra Food Indonesia 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 Sentra Food 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 Sentra Food Indonesia 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 Sentra Food i.e., Sentra Food and Garudafood Putra go up and down completely randomly.

Pair Corralation between Sentra Food and Garudafood Putra

Assuming the 90 days trading horizon Sentra Food Indonesia is expected to under-perform the Garudafood Putra. But the stock apears to be less risky and, when comparing its historical volatility, Sentra Food Indonesia is 1.46 times less risky than Garudafood Putra. The stock trades about -0.04 of its potential returns per unit of risk. The Garudafood Putra Putri is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  37,600  in Garudafood Putra Putri on September 14, 2024 and sell it today you would earn a total of  2,600  from holding Garudafood Putra Putri or generate 6.91% return on investment over 90 days.

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

Sentra Food Indonesia  vs.  Garudafood Putra Putri

Sentra Food Indonesia

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sentra Food Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sentra Food is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Garudafood Putra Putri

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garudafood Putra Putri are ranked lower than 5 (%) 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 Sentra Food and Garudafood Putra

The main advantage of trading using opposite Sentra Food and Garudafood Putra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sentra Food 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 Sentra Food Indonesia 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.