Correlation Between Gozco Plantations and Tunas Baru

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

By analyzing existing cross correlation between Gozco Plantations Tbk and Tunas Baru Lampung, you can compare the effects of market volatilities on Gozco Plantations and Tunas Baru 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 Gozco Plantations with a short position of Tunas Baru. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gozco Plantations and Tunas Baru.

Diversification Opportunities for Gozco Plantations and Tunas Baru

0.69

Correlation Coefficient

Gozco Plantations  Tunas Baru

Poor diversification

The 3 months correlation between Gozco and Tunas is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gozco Plantations Tbk and Tunas Baru Lampung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tunas Baru Lampung and Gozco Plantations 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 Gozco Plantations Tbk are associated (or correlated) with Tunas Baru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tunas Baru Lampung has no effect on the direction of Gozco Plantations i.e., Gozco Plantations and Tunas Baru go up and down completely randomly.

Pair Corralation between Gozco Plantations and Tunas Baru

Assuming the 90 days trading horizon Gozco Plantations Tbk is expected to generate 2.11 times more return on investment than Tunas Baru. However, Gozco Plantations is 2.11 times more volatile than Tunas Baru Lampung. It trades about 0.08 of its potential returns per unit of risk. Tunas Baru Lampung is currently generating about 0.07 per unit of risk. If you would invest  9,100  in Gozco Plantations Tbk on September 17, 2024 and sell it today you would earn a total of  1,000.00  from holding Gozco Plantations Tbk or generate 10.99% return on investment over 90 days.

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

Gozco Plantations Tbk  vs.  Tunas Baru Lampung

Gozco Plantations Tbk

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gozco Plantations Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Gozco Plantations may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tunas Baru Lampung

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tunas Baru Lampung are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Tunas Baru 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 Gozco Plantations and Tunas Baru

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

The idea behind Gozco Plantations Tbk and Tunas Baru Lampung 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.