Correlation Between Optima Prima and Garuda Metalindo

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

By analyzing existing cross correlation between Optima Prima Metal and Garuda Metalindo Tbk, you can compare the effects of market volatilities on Optima Prima and Garuda Metalindo 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 Optima Prima with a short position of Garuda Metalindo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Prima and Garuda Metalindo.

Diversification Opportunities for Optima Prima and Garuda Metalindo

-0.67

Correlation Coefficient

Optima Prima  Garuda Metalindo

Excellent diversification

The 3 months correlation between Optima and Garuda is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Optima Prima Metal and Garuda Metalindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Metalindo Tbk and Optima Prima 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 Optima Prima Metal are associated (or correlated) with Garuda Metalindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Metalindo Tbk has no effect on the direction of Optima Prima i.e., Optima Prima and Garuda Metalindo go up and down completely randomly.

Pair Corralation between Optima Prima and Garuda Metalindo

Assuming the 90 days trading horizon Optima Prima Metal is expected to under-perform the Garuda Metalindo. In addition to that, Optima Prima is 2.14 times more volatile than Garuda Metalindo Tbk. It trades about -0.27 of its total potential returns per unit of risk. Garuda Metalindo Tbk is currently generating about 0.2 per unit of volatility. If you would invest  104,500  in Garuda Metalindo Tbk on September 13, 2024 and sell it today you would earn a total of  25,500  from holding Garuda Metalindo Tbk or generate 24.4% return on investment over 90 days.

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

Optima Prima Metal  vs.  Garuda Metalindo Tbk

Optima Prima Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Prima Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Garuda Metalindo Tbk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Metalindo Tbk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Garuda Metalindo disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optima Prima and Garuda Metalindo

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

The idea behind Optima Prima Metal and Garuda Metalindo 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.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.