Correlation Between Garudafood Putra and Sekar Bumi

Can any of the company-specific risk be diversified away by investing in both Garudafood Putra and Sekar Bumi 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 Sekar Bumi 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 Sekar Bumi Tbk, you can compare the effects of market volatilities on Garudafood Putra and Sekar Bumi 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 Sekar Bumi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garudafood Putra and Sekar Bumi.

Diversification Opportunities for Garudafood Putra and Sekar Bumi

0.51

Correlation Coefficient

Garudafood Putra  Sekar Bumi

Very weak diversification

The 3 months correlation between Garudafood and Sekar is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Garudafood Putra Putri and Sekar Bumi Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekar Bumi Tbk 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 Sekar Bumi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekar Bumi Tbk has no effect on the direction of Garudafood Putra i.e., Garudafood Putra and Sekar Bumi go up and down completely randomly.

Pair Corralation between Garudafood Putra and Sekar Bumi

Assuming the 90 days trading horizon Garudafood Putra is expected to generate 10.31 times less return on investment than Sekar Bumi. But when comparing it to its historical volatility, Garudafood Putra Putri is 3.84 times less risky than Sekar Bumi. It trades about 0.06 of its potential returns per unit of risk. Sekar Bumi Tbk is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  30,800  in Sekar Bumi Tbk on September 17, 2024 and sell it today you would earn a total of  28,200  from holding Sekar Bumi Tbk or generate 91.56% return on investment over 90 days.

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

Garudafood Putra Putri  vs.  Sekar Bumi Tbk

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.

Sekar Bumi Tbk

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sekar Bumi Tbk are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sekar Bumi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garudafood Putra and Sekar Bumi

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

The idea behind Garudafood Putra Putri and Sekar Bumi Tbk 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.