Correlation Between Imperial Brands and PT Gudang

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

By analyzing existing cross correlation between Imperial Brands PLC and PT Gudang Garam, you can compare the effects of market volatilities on Imperial Brands and PT Gudang 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 Imperial Brands with a short position of PT Gudang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and PT Gudang.

Diversification Opportunities for Imperial Brands and PT Gudang

0.0

Correlation Coefficient

Imperial Brands  PT Gudang

Pay attention - limited upside

The 3 months correlation between Imperial and GGNPF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and PT Gudang Garam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Gudang Garam and Imperial Brands 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 Imperial Brands PLC are associated (or correlated) with PT Gudang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Gudang Garam has no effect on the direction of Imperial Brands i.e., Imperial Brands and PT Gudang go up and down completely randomly.

Pair Corralation between Imperial Brands and PT Gudang

Assuming the 90 days horizon Imperial Brands PLC is expected to generate 0.81 times more return on investment than PT Gudang. However, Imperial Brands PLC is 1.23 times less risky than PT Gudang. It trades about 0.16 of its potential returns per unit of risk. PT Gudang Garam is currently generating about -0.08 per unit of risk. If you would invest  1,811  in Imperial Brands PLC on September 26, 2024 and sell it today you would earn a total of  1,406  from holding Imperial Brands PLC or generate 77.64% return on investment over 90 days.

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

Imperial Brands PLC  vs.  PT Gudang Garam

Imperial Brands PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Imperial Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PT Gudang Garam

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Gudang Garam has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Gudang is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Imperial Brands and PT Gudang

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

The idea behind Imperial Brands PLC and PT Gudang Garam 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.