Correlation Between Garuda Indonesia and Bank Dinar

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

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

Diversification Opportunities for Garuda Indonesia and Bank Dinar

-0.75

Correlation Coefficient

Garuda Indonesia  Bank Dinar

Pay attention - limited upside

The 3 months correlation between Garuda and Bank is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Indonesia Persero and Bank Dinar Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Dinar Indonesia and Garuda Indonesia 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 Garuda Indonesia Persero are associated (or correlated) with Bank Dinar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Dinar Indonesia has no effect on the direction of Garuda Indonesia i.e., Garuda Indonesia and Bank Dinar go up and down completely randomly.

Pair Corralation between Garuda Indonesia and Bank Dinar

Assuming the 90 days trading horizon Garuda Indonesia Persero is expected to under-perform the Bank Dinar. But the stock apears to be less risky and, when comparing its historical volatility, Garuda Indonesia Persero is 3.29 times less risky than Bank Dinar. The stock trades about -0.14 of its potential returns per unit of risk. The Bank Dinar Indonesia is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,500  in Bank Dinar Indonesia on September 16, 2024 and sell it today you would earn a total of  4,100  from holding Bank Dinar Indonesia or generate 48.24% return on investment over 90 days.

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

Garuda Indonesia Persero  vs.  Bank Dinar Indonesia

Garuda Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Indonesia Persero 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bank Dinar Indonesia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Dinar Indonesia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Bank Dinar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garuda Indonesia and Bank Dinar

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

The idea behind Garuda Indonesia Persero and Bank Dinar Indonesia 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.