Correlation Between GM and Pembangunan Graha

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

By analyzing existing cross correlation between General Motors and Pembangunan Graha Lestari, you can compare the effects of market volatilities on GM and Pembangunan Graha 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 GM with a short position of Pembangunan Graha. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Pembangunan Graha.

Diversification Opportunities for GM and Pembangunan Graha

0.76

Correlation Coefficient

GM  Pembangunan Graha

Poor diversification

The 3 months correlation between GM and Pembangunan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Pembangunan Graha Lestari in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembangunan Graha Lestari and GM 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 General Motors are associated (or correlated) with Pembangunan Graha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembangunan Graha Lestari has no effect on the direction of GM i.e., GM and Pembangunan Graha go up and down completely randomly.

Pair Corralation between GM and Pembangunan Graha

Allowing for the 90-day total investment horizon GM is expected to generate 4.44 times less return on investment than Pembangunan Graha. But when comparing it to its historical volatility, General Motors is 2.33 times less risky than Pembangunan Graha. It trades about 0.05 of its potential returns per unit of risk. Pembangunan Graha Lestari is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,300  in Pembangunan Graha Lestari on September 15, 2024 and sell it today you would earn a total of  6,600  from holding Pembangunan Graha Lestari or generate 58.41% return on investment over 90 days.

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

General Motors  vs.  Pembangunan Graha Lestari

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pembangunan Graha Lestari

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pembangunan Graha Lestari are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pembangunan Graha may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Pembangunan Graha

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

The idea behind General Motors and Pembangunan Graha Lestari 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.