Correlation Between Repco Home and Garuda Construction

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

By analyzing existing cross correlation between Repco Home Finance and Garuda Construction Engineering, you can compare the effects of market volatilities on Repco Home and Garuda Construction 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 Repco Home with a short position of Garuda Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repco Home and Garuda Construction.

Diversification Opportunities for Repco Home and Garuda Construction

0.65

Correlation Coefficient

Repco Home  Garuda Construction

Poor diversification

The 3 months correlation between Repco and Garuda is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction and Repco Home 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 Repco Home Finance are associated (or correlated) with Garuda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Construction has no effect on the direction of Repco Home i.e., Repco Home and Garuda Construction go up and down completely randomly.

Pair Corralation between Repco Home and Garuda Construction

Assuming the 90 days trading horizon Repco Home Finance is expected to under-perform the Garuda Construction. But the stock apears to be less risky and, when comparing its historical volatility, Repco Home Finance is 2.3 times less risky than Garuda Construction. The stock trades about -0.19 of its potential returns per unit of risk. The Garuda Construction Engineering is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,636  in Garuda Construction Engineering on September 22, 2024 and sell it today you would earn a total of  1,191  from holding Garuda Construction Engineering or generate 11.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

Repco Home Finance  vs.  Garuda Construction Engineerin

Repco Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repco Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Garuda Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repco Home and Garuda Construction

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

The idea behind Repco Home Finance and Garuda Construction Engineering 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.