Correlation Between GUDANG GARAM and Chevron

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

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

Diversification Opportunities for GUDANG GARAM and Chevron

-0.85

Correlation Coefficient

GUDANG GARAM  Chevron

Pay attention - limited upside

The 3 months correlation between GUDANG and Chevron is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding GUDANG GARAM and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and GUDANG GARAM 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 GUDANG GARAM are associated (or correlated) with Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of GUDANG GARAM i.e., GUDANG GARAM and Chevron go up and down completely randomly.

Pair Corralation between GUDANG GARAM and Chevron

Assuming the 90 days trading horizon GUDANG GARAM is expected to under-perform the Chevron. In addition to that, GUDANG GARAM is 1.69 times more volatile than Chevron. It trades about -0.02 of its total potential returns per unit of risk. Chevron is currently generating about 0.01 per unit of volatility. If you would invest  14,718  in Chevron on September 2, 2024 and sell it today you would earn a total of  582.00  from holding Chevron or generate 3.95% return on investment over 90 days.

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

GUDANG GARAM  vs.  Chevron

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.

Chevron

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Chevron unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUDANG GARAM and Chevron

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

The idea behind GUDANG GARAM and Chevron 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.