Correlation Between Bekasi Fajar and Lippo Karawaci

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

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

Diversification Opportunities for Bekasi Fajar and Lippo Karawaci

0.79

Correlation Coefficient

Bekasi Fajar  Lippo Karawaci

Poor diversification

The 3 months correlation between Bekasi and Lippo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bekasi Fajar Industrial and Lippo Karawaci Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lippo Karawaci Tbk and Bekasi Fajar 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 Fajar Industrial are associated (or correlated) with Lippo Karawaci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lippo Karawaci Tbk has no effect on the direction of Bekasi Fajar i.e., Bekasi Fajar and Lippo Karawaci go up and down completely randomly.

Pair Corralation between Bekasi Fajar and Lippo Karawaci

Assuming the 90 days trading horizon Bekasi Fajar Industrial is expected to under-perform the Lippo Karawaci. But the stock apears to be less risky and, when comparing its historical volatility, Bekasi Fajar Industrial is 1.3 times less risky than Lippo Karawaci. The stock trades about -0.28 of its potential returns per unit of risk. The Lippo Karawaci Tbk is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  10,000  in Lippo Karawaci Tbk on December 4, 2024 and sell it today you would lose (1,200) from holding Lippo Karawaci Tbk or give up 12.0% of portfolio value over 90 days.

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

Bekasi Fajar Industrial  vs.  Lippo Karawaci Tbk

Bekasi Fajar Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bekasi Fajar Industrial 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lippo Karawaci Tbk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Bekasi Fajar and Lippo Karawaci

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

The idea behind Bekasi Fajar Industrial and Lippo Karawaci 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.