Correlation Between Ciputra Development and Natura City

Can any of the company-specific risk be diversified away by investing in both Ciputra Development and Natura City 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 Ciputra Development and Natura City into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ciputra Development Tbk and Natura City Developments, you can compare the effects of market volatilities on Ciputra Development and Natura City 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 Ciputra Development with a short position of Natura City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ciputra Development and Natura City.

Diversification Opportunities for Ciputra Development and Natura City

0.84

Correlation Coefficient

Ciputra Development  Natura City

Very poor diversification

The 3 months correlation between Ciputra and Natura is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ciputra Development Tbk and Natura City Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura City Developments and Ciputra Development 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 Ciputra Development Tbk are associated (or correlated) with Natura City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura City Developments has no effect on the direction of Ciputra Development i.e., Ciputra Development and Natura City go up and down completely randomly.

Pair Corralation between Ciputra Development and Natura City

Assuming the 90 days trading horizon Ciputra Development Tbk is expected to generate 0.76 times more return on investment than Natura City. However, Ciputra Development Tbk is 1.31 times less risky than Natura City. It trades about -0.15 of its potential returns per unit of risk. Natura City Developments is currently generating about -0.15 per unit of risk. If you would invest  97,500  in Ciputra Development Tbk on December 24, 2024 and sell it today you would lose (23,000) from holding Ciputra Development Tbk or give up 23.59% of portfolio value over 90 days.

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

Ciputra Development Tbk  vs.  Natura City Developments

Ciputra Development Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ciputra Development 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.

Natura City Developments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natura City Developments 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 Ciputra Development and Natura City

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

The idea behind Ciputra Development Tbk and Natura City Developments 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.