Correlation Between Garudafood Putra and Formosa Ingredient

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

By analyzing existing cross correlation between Garudafood Putra Putri and Formosa Ingredient Factory, you can compare the effects of market volatilities on Garudafood Putra and Formosa Ingredient 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 Garudafood Putra with a short position of Formosa Ingredient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garudafood Putra and Formosa Ingredient.

Diversification Opportunities for Garudafood Putra and Formosa Ingredient

-0.1

Correlation Coefficient

Garudafood Putra  Formosa Ingredient

Good diversification

The 3 months correlation between Garudafood and Formosa is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Garudafood Putra Putri and Formosa Ingredient Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Ingredient and Garudafood Putra 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 Garudafood Putra Putri are associated (or correlated) with Formosa Ingredient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Ingredient has no effect on the direction of Garudafood Putra i.e., Garudafood Putra and Formosa Ingredient go up and down completely randomly.

Pair Corralation between Garudafood Putra and Formosa Ingredient

Assuming the 90 days trading horizon Garudafood Putra Putri is expected to generate 0.49 times more return on investment than Formosa Ingredient. However, Garudafood Putra Putri is 2.06 times less risky than Formosa Ingredient. It trades about 0.06 of its potential returns per unit of risk. Formosa Ingredient Factory is currently generating about -0.02 per unit of risk. If you would invest  37,600  in Garudafood Putra Putri on September 16, 2024 and sell it today you would earn a total of  2,600  from holding Garudafood Putra Putri or generate 6.91% return on investment over 90 days.

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

Garudafood Putra Putri  vs.  Formosa Ingredient Factory

Garudafood Putra Putri

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garudafood Putra Putri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Garudafood Putra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Formosa Ingredient

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formosa Ingredient Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Formosa Ingredient 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 Garudafood Putra and Formosa Ingredient

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

The idea behind Garudafood Putra Putri and Formosa Ingredient Factory 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..