Correlation Between Gudang Garam and GoTo Gojek

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

By analyzing existing cross correlation between Gudang Garam Tbk and GoTo Gojek Tokopedia, you can compare the effects of market volatilities on Gudang Garam and GoTo Gojek 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 GoTo Gojek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gudang Garam and GoTo Gojek.

Diversification Opportunities for Gudang Garam and GoTo Gojek

-0.53

Correlation Coefficient

Gudang Garam  GoTo Gojek

Excellent diversification

The 3 months correlation between Gudang and GoTo is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and GoTo Gojek Tokopedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoTo Gojek Tokopedia 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 Tbk are associated (or correlated) with GoTo Gojek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoTo Gojek Tokopedia has no effect on the direction of Gudang Garam i.e., Gudang Garam and GoTo Gojek go up and down completely randomly.

Pair Corralation between Gudang Garam and GoTo Gojek

Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the GoTo Gojek. But the stock apears to be less risky and, when comparing its historical volatility, Gudang Garam Tbk is 2.65 times less risky than GoTo Gojek. The stock trades about -0.24 of its potential returns per unit of risk. The GoTo Gojek Tokopedia is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,200  in GoTo Gojek Tokopedia on August 30, 2024 and sell it today you would earn a total of  2,400  from holding GoTo Gojek Tokopedia or generate 46.15% return on investment over 90 days.

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

Gudang Garam Tbk  vs.  GoTo Gojek Tokopedia

Gudang Garam Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gudang Garam 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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

GoTo Gojek Tokopedia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GoTo Gojek Tokopedia are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, GoTo Gojek disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gudang Garam and GoTo Gojek

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

The idea behind Gudang Garam Tbk and GoTo Gojek Tokopedia 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.