Correlation Between Garuda Construction and Tree House

Can any of the company-specific risk be diversified away by investing in both Garuda Construction and Tree House 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 Construction and Tree House into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garuda Construction Engineering and Tree House Education, you can compare the effects of market volatilities on Garuda Construction and Tree House 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 Construction with a short position of Tree House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Construction and Tree House.

Diversification Opportunities for Garuda Construction and Tree House

0.48

Correlation Coefficient

Garuda Construction  Tree House

Very weak diversification

The 3 months correlation between Garuda and Tree is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and Tree House Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree House Education and Garuda Construction 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 Construction Engineering are associated (or correlated) with Tree House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree House Education has no effect on the direction of Garuda Construction i.e., Garuda Construction and Tree House go up and down completely randomly.

Pair Corralation between Garuda Construction and Tree House

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 1.79 times more return on investment than Tree House. However, Garuda Construction is 1.79 times more volatile than Tree House Education. It trades about -0.06 of its potential returns per unit of risk. Tree House Education is currently generating about -0.17 per unit of risk. If you would invest  10,636  in Garuda Construction Engineering on September 4, 2024 and sell it today you would lose (1,201) from holding Garuda Construction Engineering or give up 11.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	55.56%
Values	Daily Returns

Garuda Construction Engineerin  vs.  Tree House Education

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tree House Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tree House Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Garuda Construction and Tree House

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

The idea behind Garuda Construction Engineering and Tree House Education 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.