Correlation Between PT Gudang and Electronic Control

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

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

Diversification Opportunities for PT Gudang and Electronic Control

-0.9

Correlation Coefficient

PT Gudang  Electronic Control

Pay attention - limited upside

The 3 months correlation between GGNPF and Electronic is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding PT Gudang Garam and Electronic Control Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Control and PT Gudang 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 PT Gudang Garam are associated (or correlated) with Electronic Control. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Control has no effect on the direction of PT Gudang i.e., PT Gudang and Electronic Control go up and down completely randomly.

Pair Corralation between PT Gudang and Electronic Control

Assuming the 90 days horizon PT Gudang Garam is expected to under-perform the Electronic Control. But the pink sheet apears to be less risky and, when comparing its historical volatility, PT Gudang Garam is 5.41 times less risky than Electronic Control. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Electronic Control Security is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Electronic Control Security on February 23, 2024 and sell it today you would lose (7.58) from holding Electronic Control Security or give up 94.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.16%
Values	Daily Returns

PT Gudang Garam  vs.  Electronic Control Security

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Electronic Control

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Control Security are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Electronic Control unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Gudang and Electronic Control

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

The idea behind PT Gudang Garam and Electronic Control Security 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.