Correlation Between Goodyear Indonesia and Sepatu Bata

Can any of the company-specific risk be diversified away by investing in both Goodyear Indonesia and Sepatu Bata 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 Goodyear Indonesia and Sepatu Bata into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Goodyear Indonesia Tbk and Sepatu Bata Tbk, you can compare the effects of market volatilities on Goodyear Indonesia and Sepatu Bata 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 Goodyear Indonesia with a short position of Sepatu Bata. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Indonesia and Sepatu Bata.

Diversification Opportunities for Goodyear Indonesia and Sepatu Bata

0.39

Correlation Coefficient

Goodyear Indonesia  Sepatu Bata

Weak diversification

The 3 months correlation between Goodyear and Sepatu is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Indonesia Tbk and Sepatu Bata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sepatu Bata Tbk and Goodyear Indonesia 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 Goodyear Indonesia Tbk are associated (or correlated) with Sepatu Bata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sepatu Bata Tbk has no effect on the direction of Goodyear Indonesia i.e., Goodyear Indonesia and Sepatu Bata go up and down completely randomly.

Pair Corralation between Goodyear Indonesia and Sepatu Bata

Assuming the 90 days trading horizon Goodyear Indonesia Tbk is expected to generate 1.21 times more return on investment than Sepatu Bata. However, Goodyear Indonesia is 1.21 times more volatile than Sepatu Bata Tbk. It trades about -0.01 of its potential returns per unit of risk. Sepatu Bata Tbk is currently generating about -0.17 per unit of risk. If you would invest  152,000  in Goodyear Indonesia Tbk on September 15, 2024 and sell it today you would lose (4,000) from holding Goodyear Indonesia Tbk or give up 2.63% of portfolio value over 90 days.

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

Goodyear Indonesia Tbk  vs.  Sepatu Bata Tbk

Goodyear Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sepatu Bata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sepatu Bata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Goodyear Indonesia and Sepatu Bata

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

The idea behind Goodyear Indonesia Tbk and Sepatu Bata 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.