Correlation Between PT Gajah and Bridgestone

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

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

Diversification Opportunities for PT Gajah and Bridgestone

0.15

Correlation Coefficient

PT Gajah  Bridgestone

Average diversification

The 3 months correlation between GH8 and Bridgestone is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding PT Gajah Tunggal and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone and PT Gajah 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 PT Gajah Tunggal are associated (or correlated) with Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of PT Gajah i.e., PT Gajah and Bridgestone go up and down completely randomly.

Pair Corralation between PT Gajah and Bridgestone

Assuming the 90 days horizon PT Gajah Tunggal is expected to generate 6.22 times more return on investment than Bridgestone. However, PT Gajah is 6.22 times more volatile than Bridgestone. It trades about 0.02 of its potential returns per unit of risk. Bridgestone is currently generating about -0.01 per unit of risk. If you would invest  6.15  in PT Gajah Tunggal on September 12, 2024 and sell it today you would lose (0.70) from holding PT Gajah Tunggal or give up 11.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

PT Gajah Tunggal  vs.  Bridgestone

PT Gajah Tunggal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Gajah Tunggal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Gajah reported solid returns over the last few months and may actually be approaching a breakup point.

Bridgestone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgestone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bridgestone is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Gajah and Bridgestone

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

The idea behind PT Gajah Tunggal and Bridgestone 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.