Correlation Between Bekasi Asri and Lippo Cikarang

Can any of the company-specific risk be diversified away by investing in both Bekasi Asri and Lippo Cikarang 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 Bekasi Asri and Lippo Cikarang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bekasi Asri Pemula and Lippo Cikarang Tbk, you can compare the effects of market volatilities on Bekasi Asri and Lippo Cikarang 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 Bekasi Asri with a short position of Lippo Cikarang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bekasi Asri and Lippo Cikarang.

Diversification Opportunities for Bekasi Asri and Lippo Cikarang

0.65

Correlation Coefficient

Bekasi Asri  Lippo Cikarang

Poor diversification

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

Pair Corralation between Bekasi Asri and Lippo Cikarang

Assuming the 90 days trading horizon Bekasi Asri Pemula is expected to generate 2.26 times more return on investment than Lippo Cikarang. However, Bekasi Asri is 2.26 times more volatile than Lippo Cikarang Tbk. It trades about 0.08 of its potential returns per unit of risk. Lippo Cikarang Tbk is currently generating about -0.42 per unit of risk. If you would invest  5,300  in Bekasi Asri Pemula on October 10, 2024 and sell it today you would earn a total of  300.00  from holding Bekasi Asri Pemula or generate 5.66% return on investment over 90 days.

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

Bekasi Asri Pemula  vs.  Lippo Cikarang Tbk

Bekasi Asri Pemula

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bekasi Asri Pemula has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Bekasi Asri is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Lippo Cikarang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lippo Cikarang Tbk 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bekasi Asri and Lippo Cikarang

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

The idea behind Bekasi Asri Pemula and Lippo Cikarang 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.