Correlation Between Guna Timur and Weha Transportasi

Can any of the company-specific risk be diversified away by investing in both Guna Timur and Weha Transportasi 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 Guna Timur and Weha Transportasi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guna Timur Raya and Weha Transportasi Indonesia, you can compare the effects of market volatilities on Guna Timur and Weha Transportasi 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 Guna Timur with a short position of Weha Transportasi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guna Timur and Weha Transportasi.

Diversification Opportunities for Guna Timur and Weha Transportasi

0.86

Correlation Coefficient

Guna Timur  Weha Transportasi

Very poor diversification

The 3 months correlation between Guna and Weha is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Guna Timur Raya and Weha Transportasi Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weha Transportasi and Guna Timur 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 Guna Timur Raya are associated (or correlated) with Weha Transportasi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weha Transportasi has no effect on the direction of Guna Timur i.e., Guna Timur and Weha Transportasi go up and down completely randomly.

Pair Corralation between Guna Timur and Weha Transportasi

Assuming the 90 days trading horizon Guna Timur Raya is expected to under-perform the Weha Transportasi. In addition to that, Guna Timur is 2.09 times more volatile than Weha Transportasi Indonesia. It trades about -0.07 of its total potential returns per unit of risk. Weha Transportasi Indonesia is currently generating about -0.09 per unit of volatility. If you would invest  13,100  in Weha Transportasi Indonesia on September 16, 2024 and sell it today you would lose (1,500) from holding Weha Transportasi Indonesia or give up 11.45% of portfolio value over 90 days.

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

Guna Timur Raya  vs.  Weha Transportasi Indonesia

Guna Timur Raya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guna Timur Raya 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.

Weha Transportasi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weha Transportasi Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Guna Timur and Weha Transportasi

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

The idea behind Guna Timur Raya and Weha Transportasi Indonesia 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.