Correlation Between Pembangunan Graha and Goodyear Indonesia

Can any of the company-specific risk be diversified away by investing in both Pembangunan Graha and Goodyear Indonesia 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 Pembangunan Graha and Goodyear Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pembangunan Graha Lestari and Goodyear Indonesia Tbk, you can compare the effects of market volatilities on Pembangunan Graha and Goodyear Indonesia 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 Pembangunan Graha with a short position of Goodyear Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembangunan Graha and Goodyear Indonesia.

Diversification Opportunities for Pembangunan Graha and Goodyear Indonesia

-0.43

Correlation Coefficient

Pembangunan Graha  Goodyear Indonesia

Very good diversification

The 3 months correlation between Pembangunan and Goodyear is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Pembangunan Graha Lestari and Goodyear Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Indonesia Tbk and Pembangunan Graha 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 Pembangunan Graha Lestari are associated (or correlated) with Goodyear Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Indonesia Tbk has no effect on the direction of Pembangunan Graha i.e., Pembangunan Graha and Goodyear Indonesia go up and down completely randomly.

Pair Corralation between Pembangunan Graha and Goodyear Indonesia

Assuming the 90 days trading horizon Pembangunan Graha Lestari is expected to under-perform the Goodyear Indonesia. In addition to that, Pembangunan Graha is 1.32 times more volatile than Goodyear Indonesia Tbk. It trades about -0.14 of its total potential returns per unit of risk. Goodyear Indonesia Tbk is currently generating about -0.04 per unit of volatility. If you would invest  151,500  in Goodyear Indonesia Tbk on September 15, 2024 and sell it today you would lose (3,500) from holding Goodyear Indonesia Tbk or give up 2.31% of portfolio value over 90 days.

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

Pembangunan Graha Lestari  vs.  Goodyear Indonesia Tbk

Pembangunan Graha Lestari

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pembangunan Graha Lestari are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Pembangunan Graha may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goodyear Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodyear Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Goodyear Indonesia 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 Pembangunan Graha and Goodyear Indonesia

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

The idea behind Pembangunan Graha Lestari and Goodyear Indonesia 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.