Correlation Between Gunung Raja and Nusa Palapa

Can any of the company-specific risk be diversified away by investing in both Gunung Raja and Nusa Palapa 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 Nusa Palapa 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 Nusa Palapa Gemilang, you can compare the effects of market volatilities on Gunung Raja and Nusa Palapa 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 Nusa Palapa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gunung Raja and Nusa Palapa.

Diversification Opportunities for Gunung Raja and Nusa Palapa

0.32

Correlation Coefficient

Gunung Raja  Nusa Palapa

Weak diversification

The 3 months correlation between Gunung and Nusa is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Gunung Raja Paksi and Nusa Palapa Gemilang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nusa Palapa Gemilang 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 Nusa Palapa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nusa Palapa Gemilang has no effect on the direction of Gunung Raja i.e., Gunung Raja and Nusa Palapa go up and down completely randomly.

Pair Corralation between Gunung Raja and Nusa Palapa

Assuming the 90 days trading horizon Gunung Raja Paksi is expected to under-perform the Nusa Palapa. In addition to that, Gunung Raja is 1.2 times more volatile than Nusa Palapa Gemilang. It trades about -0.12 of its total potential returns per unit of risk. Nusa Palapa Gemilang is currently generating about -0.07 per unit of volatility. If you would invest  3,800  in Nusa Palapa Gemilang on September 15, 2024 and sell it today you would lose (200.00) from holding Nusa Palapa Gemilang or give up 5.26% of portfolio value over 90 days.

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

Gunung Raja Paksi  vs.  Nusa Palapa Gemilang

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.

Nusa Palapa Gemilang

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nusa Palapa Gemilang are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Nusa Palapa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gunung Raja and Nusa Palapa

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

The idea behind Gunung Raja Paksi and Nusa Palapa Gemilang 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.