Correlation Between Gunung Raja and Gunawan Dianjaya

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

By analyzing existing cross correlation between Gunung Raja Paksi and Gunawan Dianjaya Steel, you can compare the effects of market volatilities on Gunung Raja and Gunawan Dianjaya 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 Gunung Raja with a short position of Gunawan Dianjaya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gunung Raja and Gunawan Dianjaya.

Diversification Opportunities for Gunung Raja and Gunawan Dianjaya

0.16

Correlation Coefficient

Gunung Raja  Gunawan Dianjaya

Average diversification

The 3 months correlation between Gunung and Gunawan is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gunung Raja Paksi and Gunawan Dianjaya Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gunawan Dianjaya Steel and Gunung Raja 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 Gunung Raja Paksi are associated (or correlated) with Gunawan Dianjaya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gunawan Dianjaya Steel has no effect on the direction of Gunung Raja i.e., Gunung Raja and Gunawan Dianjaya go up and down completely randomly.

Pair Corralation between Gunung Raja and Gunawan Dianjaya

Assuming the 90 days trading horizon Gunung Raja Paksi is expected to generate 4.58 times more return on investment than Gunawan Dianjaya. However, Gunung Raja is 4.58 times more volatile than Gunawan Dianjaya Steel. It trades about 0.02 of its potential returns per unit of risk. Gunawan Dianjaya Steel is currently generating about -0.02 per unit of risk. If you would invest  28,058  in Gunung Raja Paksi on September 16, 2024 and sell it today you would lose (4,858) from holding Gunung Raja Paksi or give up 17.31% of portfolio value over 90 days.

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

Gunung Raja Paksi  vs.  Gunawan Dianjaya Steel

Gunung Raja Paksi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gunung Raja Paksi are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Gunung Raja disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gunawan Dianjaya Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gunawan Dianjaya Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Gunawan Dianjaya 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 Gunung Raja and Gunawan Dianjaya

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

The idea behind Gunung Raja Paksi and Gunawan Dianjaya Steel 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.