Correlation Between Goodyear Indonesia and Primarindo Asia

Can any of the company-specific risk be diversified away by investing in both Goodyear Indonesia and Primarindo Asia 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 Primarindo Asia 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 Primarindo Asia Infrastructure, you can compare the effects of market volatilities on Goodyear Indonesia and Primarindo Asia 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 Primarindo Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodyear Indonesia and Primarindo Asia.

Diversification Opportunities for Goodyear Indonesia and Primarindo Asia

0.29

Correlation Coefficient

Goodyear Indonesia  Primarindo Asia

Modest diversification

The 3 months correlation between Goodyear and Primarindo is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Goodyear Indonesia Tbk and Primarindo Asia Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primarindo Asia Infr 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 Primarindo Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primarindo Asia Infr has no effect on the direction of Goodyear Indonesia i.e., Goodyear Indonesia and Primarindo Asia go up and down completely randomly.

Pair Corralation between Goodyear Indonesia and Primarindo Asia

Assuming the 90 days trading horizon Goodyear Indonesia Tbk is expected to generate 0.6 times more return on investment than Primarindo Asia. However, Goodyear Indonesia Tbk is 1.65 times less risky than Primarindo Asia. It trades about -0.01 of its potential returns per unit of risk. Primarindo Asia Infrastructure is currently generating about -0.02 per unit of risk. If you would invest  152,000  in Goodyear Indonesia Tbk on September 16, 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.  Primarindo Asia Infrastructure

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.

Primarindo Asia Infr

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Goodyear Indonesia and Primarindo Asia

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

The idea behind Goodyear Indonesia Tbk and Primarindo Asia Infrastructure 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.